Question 1

For the following problems, choose among the following major banking laws.
-Provided for state regulation of insurance.

Accepted Answer

The Financial Services Modernization Act of 1999, also known as the Gramm-Leach-Bliley Act, allowed for the regulation of insurance by states.

Question 2

For the following problems, choose among the following major banking laws.
-Eliminated restrictions on banks,insurance companies,and securities firms from entering into each other's areas of business.

Accepted Answer

The Financial Services Modernization Act of 1999, also known as the Gramm-Leach-Bliley Act, eliminated restrictions on banks, insurance companies, and securities firms from entering into each other's areas of business, allowing for greater consolidation and integration within the financial industry.

Question 3

Failure to monitor the actions of firms in a timely and complete fashion after purchasing securities in that firm exposes the investor to agency costs.

Accepted Answer

Failure to monitor the actions of firms in a timely and complete fashion after purchasing securities can lead to the accumulation of agency costs, as the investor may not be aware of any potentially risky or fraudulent behavior by the firm in which they have invested. This underscores the importance of ongoing due diligence and monitoring of investment holdings.

Question 4

Firms in industries that have low costs of entry tend to enjoy larger profits than firms in industries with high costs of entry.

Accepted Answer

Firms in industries with high costs of entry tend to have higher barriers to entry, which means there are fewer competitors and less price competition. This can lead to larger profits for these firms. In contrast, industries with low costs of entry tend to be more competitive, which can lead to lower profits for individual firms.

Question 5

The proportion of financial assets controlled by depository institutions has been increasing in recent years.

Accepted Answer

The proportion of financial assets controlled by depository institutions has actually been decreasing over the years due to the rise of non-bank financial intermediaries and the diversification of financial markets.

Question 6

For the following problems, choose among the following major banking laws.
-This legislation streamlined bank holding company supervision,with the Federal Reserve as the umbrella holding company supervisor.

Accepted Answer

The Financial Services Modernization Act of 1999, also known as the Gramm-Leach-Bliley Act, streamlined bank holding company supervision and designated the Federal Reserve as the umbrella supervisor.

Question 7

For the following problems, choose among the following major banking laws.
-This legislation introduced risk based deposit insurance premiums.

Accepted Answer

The Federal Deposit Insurance Corporation Improvement Act (FDICIA) of 1991 introduced risk based deposit insurance premiums.

Question 8

For the following problems, choose among the following major banking laws.
-This legislation introduced prompt corrective action requiring mandatory intervention by regulators when a bank's capital falls below certain levels.

Accepted Answer

The Federal Deposit Insurance Corporation Improvement Act (FDICIA) of 1991 introduced prompt corrective action, requiring mandatory intervention by regulators when a bank's capital falls below certain levels.

Question 9

Pension and mutual funds have a lower correlation between the maturities of their assets and liabilities than do commercial banks and thrifts.

Accepted Answer

The answer of Pension and mutual funds have a lower...

Question 10

For the following problems, choose among the following major banking laws.
-This legislation limited the use of "too big to fail" bailouts.

Accepted Answer

The Federal Deposit Insurance Corporation Improvement Act (FDICIA) of 1991 limited the use of "too big to fail" bailouts by placing stricter regulations on banks and increasing their accountability. It also established the FDIC as the primary regulator for thrift institutions.

Question 11

As of 2015,U.S.FIs held assets totaling over $29 trillion.

Accepted Answer

According to the Federal Reserve, as of 2015, U.S. FIs held assets totaling over $29 trillion.

Question 12

For the following problems, choose among the following major banking laws.
-This legislation permits bank holding companies to acquire banks in other states.

Accepted Answer

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 permits bank holding companies to acquire banks in other states.

Question 13

If a household invests in corporate securities and does not supervise how the funds are invested or used by the corporation,the risk of not earning the desired return or not having the funds returned increase.

Accepted Answer

If a household invests in corporate securities without supervising the corporation's use of the funds or investments, they may not earn the desired return or have the funds returned, leading to an increased risk.

Question 14

The standardization of many FI products is evidence of the inefficient institutionalization by financial markets and the mechanisms through which these products trade.

Accepted Answer

Standardization of financial products often reflects efforts to increase efficiency, reduce transaction costs, and enhance liquidity in the markets, rather than indicating inefficient institutionalization.

Question 15

As a result of adopting an enterprise risk management approach,an FI will invest heavily in advanced risk measurement and management systems and practices.

Accepted Answer

The answer of As a result of adopting an enterprise...

Question 16

The passage of legislation to ensure that FIs are meeting the needs of their local communities is an example of entry regulation.

Accepted Answer

The passage of legislation to ensure that Financial Institutions (FIs) are meeting the needs of their local communities is an example of conduct regulation, which governs how businesses operate, rather than entry regulation, which governs the conditions under which businesses can enter into a market.

Question 17

If not done by FIs,the process of monitoring the actions of borrowers would reduce the attractiveness and increase the risk of investing in corporate debt and equity by individuals.

Accepted Answer

If financial institutions (FIs) do not monitor the actions of borrowers, it would increase the risk and reduce the attractiveness of investing in corporate debt and equity by individuals. Monitoring helps to ensure that the borrower is using the funds for the intended purpose and reduces the likelihood of default, which in turn makes investing in corporate debt and equity more attractive and less risky for individual investors.

Question 18

The passage of legislation to prevent discrimination in lending is an example of regulation to protect investors.

Accepted Answer

The passage of legislation to prevent discrimination in lending is primarily aimed at protecting consumers or borrowers, not investors. This type of regulation ensures fair access to credit without bias based on race, gender, or other discriminatory factors.

Question 19

Financial institutions act as intermediaries between suppliers and users of money.

Accepted Answer

Financial institutions such as banks, credit unions, and investment firms facilitate the flow of funds between those who have excess funds and those who need funds for various purposes. They act as intermediaries by accepting deposits from savers and lending these funds to borrowers, thus promoting economic activity and growth.

Question 20

For the following problems, choose among the following major banking laws.
-This law allows bank holding companies to convert out-of-state subsidiary banks into branches of a single interstate bank.

Accepted Answer

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 allows bank holding companies to convert out-of-state subsidiary banks into branches of a single interstate bank.

Quiz 2: Financial Services: Depository Institutions

For the following problems, choose among the following major banking laws. -Provided for state regulation of insurance.

For the following problems, choose among the following major banking laws. -Eliminated restrictions on banks,insurance companies,and securities firms from entering into each other's areas of business.

Failure to monitor the actions of firms in a timely and complete fashion after purchasing securities in that firm exposes the investor to agency costs.

Firms in industries that have low costs of entry tend to enjoy larger profits than firms in industries with high costs of entry.

The proportion of financial assets controlled by depository institutions has been increasing in recent years.

For the following problems, choose among the following major banking laws. -This legislation streamlined bank holding company supervision,with the Federal Reserve as the umbrella holding company supervisor.

For the following problems, choose among the following major banking laws. -This legislation introduced risk based deposit insurance premiums.

For the following problems, choose among the following major banking laws. -This legislation introduced prompt corrective action requiring mandatory intervention by regulators when a bank's capital falls below certain levels.