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Financial Intermediaries and Financial Markets
Financial Intermediaries and Financial Markets MCQs
?
The act of financial intermediation consists of
transforming equity shares into debt instruments such as bonds.
converting gold into paper currency.
transforming liabilities into assets.
safekeeping other people’s funds.
?
Which one is not a function of intermediation?
It facilitates the acquisition of payment for goods and services.
It facilitates the creation of a portfolio.
It eases the liquidity constraints of households and firms.
It provides a safekeeping service for those with excess funds.
?
A portfolio is
a collection of personal liabilities
a collection of assets.
a collection of various debt instruments.
the information collected by banks to evaluate a customer’s borrowing capacity.
?
Asymmetric information means that
all parties to a transaction have the same amount of information on the other party.
information is expensive to obtain.
one party to a transaction has relatively more information than another party.
information is readily available for most parties concerned in a transaction.
?
The competition bureau stated that it would be "concerned" that a merger would restrict competition if the post-merger share of the merged entity exce...
35% and 65%.
65% and 35%.
25% and 75%
50% and 50%.
?
Moral hazard
results from the incentive for some people to engage in a transaction that is undesirable to everyone else.
results from the chance that an individual may have an incentive to act in such a way as to put that individual at a greater risk.
is when a party to a transaction has relatively more information than another party.
is when the actions of a group of individuals have undesirable effects on a given individual.
?
_______ institutions are ____ likely to fail, reducing the impact of a financial crisis.
Larger, less
Smaller, less
Larger, more
Larger, equally
?
Consolidation in the banking sector _______ lead to ________ pricing.
does, monopoly.
does, competitive.
does not, monopoly.
does, uniform
?
The reason why the financial system entails some externalities is because
the incentives of the managers of financial institutions are, at times, in line with those of its shareholders, depositors, and society in general.
they usually make very large profits.
the incentives of the managers of financial institutions, at times, conflict with those of its shareholders, depositors, and society in general.
if managed correctly, financial institutions will never be the source of externalities.
?
Chartered Banks are regulated by
the Federal government
at the provincial level.
are self-regulating.
a combination of various levels of government including the municipal level in some cases.
?
A primary market is one in which
newly printed money is transferred to the banks.
money market dealers make their most important trades.
the Bank of Canada conducts its monetary policy.
financial assets are traded for the first time.
?
The money market is for the trading of ________ instruments while the capital market is where ________ instruments are traded.
bonds, Treasury-bills.
long-term, short-term
cash, tangible
short-term, long-term
?
Securitization means that
assets that are normally not liquid are made liquid by pooling them and re-selling them as short-term assets.
short-term liquid assets are pooled and then converted to long-term high yielding assets.
the purchase of newly issued securities by Investment dealers.
describes a situation where securities are sold to the highest bidders.
?
Currency and deposits at deposit-taking institutions and mortgages account for approximately what proportion of all financial assets?
25%
50%
66%
75%
?
Approximately, what proportion of assets of the Canadian economy are financial in nature?
25%
40%
60%
80%
?
Approximately what is the proportion of assets held by the financial sector?
20%
40%
60%
95%
?
Which category of financial institution is, relatively speaking, the most important?
deposit-taking intermediaries.
non-deposit intermediaries.
insurance companies.
investment funds.
?
Deregulation may _______ entry into financial markets and thereby_________ competition.
slow, decrease.
stop, decrease.
enhance, increase.
enhance, decrease.
?
Consolidation has been shown in some markets to lead to _______ fees and/but ________ interest rates.
higher, lower.
lower, higher.
higher, higher.
lower, lower.
