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Financial and the Nonfinancial Sectors
Financial and the Nonfinancial Sectors MCQs
?
One would expect a profitable financial institution to have a spread that is
positive
neutral
negative
sometimes positive and sometimes negative, because the spread makes no difference when evaluating the profitability of a bank.
?
The leverage ratio is defined as
a measure of the assets of a firm divided by shareholder’s equity.
a measure of shareholder’s equity divides by the assets of a firm.
a measure of shareholder’s equity divides by the liabilities of a firm.
a measure of the liabilities of a firm divided by shareholder’s equity.
?
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4.00
3.43
1.667
5.00
?
What is the value of the leverage ratio in the year 2000 after the rise in interest rates?
4.00
3.43
1.667
5.00
?
The capital ratio is defined as
a measure of the assets of a firm divided by shareholder’s equity.
a measure of shareholder’s equity divides by the assets of a firm.
a measure of shareholder’s equity divides by the liabilities of a firm
a measure of the liabilities of a firm divided by shareholder’s equity.
?
Based on the above balance sheets what is the value of the capital ratio in 1999?
5.00
4.00
3.00
4.42
?
What is the value of the capital ratio in the year 2000 after the rise in interest rates?
5.00
4.00
3.00
4.42
?
The lower the capital ratio, the _________ leveraged the firm and the _________ sound is the bank.
more, more
more. less
less, less
less, but this does not affect the soundness of the bank.
?
The capital adequacy standards of the Bank of International Settlements consist of three pillars, which of the following is one of them:
lower capital requirements.
minimum capital requirements.
removal of capital requirements.
maximum capital requirements.
?
According to the BIS capital convergence requirements, government bonds held by banks receive a weight:
higher than that of cash.
lower than that of cash.
equal to that of cash.
bonds are not part of the convergence requirements.
?
The output of a financial institution is
a physical product
a service
a good or service
intermediation
?
The production possibilities frontier is defined as
the curve describing the set of tradeoffs between the production of two firms.
the curve describing the set of tradeoffs between the production of two products in the same period.
the curve describing the set of tradeoffs between production in the current period and production in the next period.
the curve describing the set of tradeoffs between the production of two products in some future period.
?
The presence of diminishing marginal returns explains
the concavity of the production possibilities frontier.
the convexity of the production possibilities frontier.
the convexity of the utility curve.
the concavity of the utility curve.
?
Leverage permits a firm to __________ its total utility.
increase
decrease
total utility remains unchanged
will sometime cause total utility to increase only if the real interest rate is 0
?
The Modigliani-Miller theorem states that under specific conditions a firm will be indifferent between borrowing
via bonds versus personal deposits
via bonds versus corporate deposits
via bonds versus savings
bonds versus equity.
?
According to the Modigliani-Miller theorem, the value of the firm is determined by
how investments are financed.
the net return on the firm’s investments.
the value of its debts.
the value of its equity.
?
Tobin’s q is defined as
the replacement cost of a firm’s capital divided by the market value of the firm.
the market value of the firm divided by the replacement cost of a firm’s capital.
the historical value of the firm divided by the replacement cost of a firm’s capital.
the market value of the firm divided by the replacement cost of a firm’s assets.
?
When Tobin’s q is low then one would expect the number of mergers and acquisitions to
increase
decrease
will not affect the number of mergers and acquisitions.
will only affect mergers and acquisitions depending on the state of the economy.
?
Which of the following cases has the greatest risk of insolvency, ceteris paribus?
A low capital ratio and a low leverage ratio.
A low capital ratio but a high leverage ratio.
A high capital ratio but a low leverage ratio.
A high capital ratio and a high leverage ratio.
?
Diminishing marginal returns to labour mean that ___________ in labour, with _________ capital, produce successively smaller __________ in output.
increases; increases in; increases
increases; increases in; decreases
increases; fixed; increases
increases; fixed; decreases
