1. What is the term for a banking environment in which banks and other financial
ID: 1103254 • Letter: 1
Question
1. What is the term for a banking environment in which banks and other financial institutions offer a full range of financial services without substantial restrictions to do so?
a*Interstate banking
b*Universal banking.
c* Second floor banking
2. Due to asymmetric information, the bankruptcy of one bank can cause the run of other banks. This is what is known as _______________
A*the effect of "too big to fail".
B*the problem of moral hazard.
C*contagion effect.
3. The lack of information that depositors have about the quality of bank assets can cause ___________________
A*banking panics.
B*bank bubbles.
C*the transformation of assets.
4. What of the following involves financial intermediaries?
A*Direct financing
B*Indirect financing
C*The direct purchase of wholesale goods.
5. Which of the following institutions specialize in lending to consumers or companies whose credibility makes it impossible for them to qualify for commercial loans?
A*Financial companies
B*Commercial banks.
C*Insurance companies
6. Which of the following is a common argument used against commercial banks investing in company papers?
A*In view of the fact that stock prices are volatile, returns on equity investments are more volatile, which increases banking risks.
B*If banks could have corporate actions, they could control more financial resources, reducing the importance of banks in the economy.
C*As shareholders, banks would have less direct access to information about the companies, which would make it harder for banks to assess their credibility.
7. Which of the following is NOT an objective of banking regulation?
A*Maintenance of liquidity.
B*Insolvency limitation.
C*Increase in bank profits.
8. Which of the following is an asset of a commercial bank?
A*Capital.
B*Real estate loan.
C*Debt of federal funds
Explanation / Answer
Answer 1 - The term for a banking environment in which banks and other financial institutions offer a full range of financial services without substantial restrictions to do so, it is known as 'Universal Banking'. Banks provide wide range services in one place. It provides financial services to the customers.
Option B is the correct answer.
Answer 2 - Due to asymmetric information, the bankruptcy of one bank can cause the run of other banks. This is what is known as 'contagion effect'. Contagion effect spreads from one economy or sector to other other region or other sector.
Option C is the correct answer.
Answer 3 - The lack of information that depositors have about the quality of bank assets can cause 'bank panics. Suppose i am a bank depositor and i do not have full information about bank' assets. If banking system fails then it will create a panic in depositor.
Option A is the correct answer.
Answer 4 - ’’Indirect financing'' involves financial intermediaries. Financial intermediaries may be any bank or individual. They facilitate financial transaction between lender and borrower.
Option B is the correct answer.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.