Financial Markets and Institutions – Exam 3, 2026 – Study Material
and Practice Questions
What has the highest concentration of mortgage related assets on the balance sheet? - ANS✔✔
Savings institutions
The predominant liabilities for savings institutions are - ANS✔✔ small time savings deposits and
FHLB Borrowings
Historically, most savings institutions were established as - ANS✔✔ Mutual Organizations
Credit unions have several advantages over banks including: - ANS✔✔ they are not taxed and
they can collectively pool funds
As a percentage of total assets, credit unions invest __________ in securities than banks and
____________ in consumer loans than commercial banks. - ANS✔✔ more;more
Factoring is _______________________________. - ANS✔✔ purchasing corporate accounts
receivables at a discount
Finance companies that make high risk loans to consumers are called _________________. -
ANS✔✔ subprime lenders
For the finance company industry as a whole, the single largest type of loan is a
____________________. - ANS✔✔ consumer loan
The following type(s) of life insurance policies do not have a savings feature: - ANS✔✔ Term Life
, The primary regulator of insurance firms is ____________. - ANS✔✔ state insurance regulator
Diversified full-line securities firms engage in all but which of the following? - ANS✔✔ raising
money via insured deposits
A best efforts offering is one where: - ANS✔✔ investment banker acts only as a distribution
agent and the issuing firm bears the risk of an unsuccessful offering
Investment firms that pool money from individuals and/or institutions and invest equity funds in
startup firms are called _____________. - ANS✔✔ venture capital firms
An unregistered issue sold to a few large institutional buyers is an example of a ____________. -
ANS✔✔ Private Placement
The ____ insures losses of funds deposited with securities firms in the event of a failure of a
securities firm. - ANS✔✔ SIPC
The most important federal legislation affecting the regulation of life insurance companies prior
to 1999 was the - ANS✔✔ The McCarran Ferguson Act
Property and casualty insurers hold ____ short-term assets than life insurers because property
and casualty loss rates are ____ predictable than life insurance loss rates. - ANS✔✔ more; less
The largest asset category of life insurers are _____________ and the largest liabilities are
____________. - ANS✔✔ bonds; policy reserves
An insurance line has a loss ratio of 72%, an expense ratio of 35%, and the firm pays 2% of
premiums to policyholders as dividends. What level of investment yield is needed to make the
P&C firm break-even? - ANS✔✔ 9%
and Practice Questions
What has the highest concentration of mortgage related assets on the balance sheet? - ANS✔✔
Savings institutions
The predominant liabilities for savings institutions are - ANS✔✔ small time savings deposits and
FHLB Borrowings
Historically, most savings institutions were established as - ANS✔✔ Mutual Organizations
Credit unions have several advantages over banks including: - ANS✔✔ they are not taxed and
they can collectively pool funds
As a percentage of total assets, credit unions invest __________ in securities than banks and
____________ in consumer loans than commercial banks. - ANS✔✔ more;more
Factoring is _______________________________. - ANS✔✔ purchasing corporate accounts
receivables at a discount
Finance companies that make high risk loans to consumers are called _________________. -
ANS✔✔ subprime lenders
For the finance company industry as a whole, the single largest type of loan is a
____________________. - ANS✔✔ consumer loan
The following type(s) of life insurance policies do not have a savings feature: - ANS✔✔ Term Life
, The primary regulator of insurance firms is ____________. - ANS✔✔ state insurance regulator
Diversified full-line securities firms engage in all but which of the following? - ANS✔✔ raising
money via insured deposits
A best efforts offering is one where: - ANS✔✔ investment banker acts only as a distribution
agent and the issuing firm bears the risk of an unsuccessful offering
Investment firms that pool money from individuals and/or institutions and invest equity funds in
startup firms are called _____________. - ANS✔✔ venture capital firms
An unregistered issue sold to a few large institutional buyers is an example of a ____________. -
ANS✔✔ Private Placement
The ____ insures losses of funds deposited with securities firms in the event of a failure of a
securities firm. - ANS✔✔ SIPC
The most important federal legislation affecting the regulation of life insurance companies prior
to 1999 was the - ANS✔✔ The McCarran Ferguson Act
Property and casualty insurers hold ____ short-term assets than life insurers because property
and casualty loss rates are ____ predictable than life insurance loss rates. - ANS✔✔ more; less
The largest asset category of life insurers are _____________ and the largest liabilities are
____________. - ANS✔✔ bonds; policy reserves
An insurance line has a loss ratio of 72%, an expense ratio of 35%, and the firm pays 2% of
premiums to policyholders as dividends. What level of investment yield is needed to make the
P&C firm break-even? - ANS✔✔ 9%
