BANK3011 EXAM QUESTIONS WITH
ANSWERS RATED A+
liquidity - ANSWER the ease of converting an asset into cash
price risk - ANSWER the risk that the sale price of an asset will be lower
than the purchase price of that asset
Financial intermediary - ANSWER an entity that acts as the 'middle person'
between two parties in a financial transaction
economies of scale - ANSWER the concept that the cost reduction in
trading and other transaction services results from increased efficiency
when FIs perform these services
asset transformer - ANSWER an FI issues financial claims that are more
attractive to household savers than the claims directly issued by
corporations
primary securities - ANSWER securities issued by corporations and backed
by the real assets of those corporations
secondary securities - ANSWER securities issued by FIs and backed by
primary securities
agency costs - ANSWER costs relating to the risk that the owners and
managers of firms that receive savers' funds will take actions with those
funds contrary to the best interests of the savers
delegated monitor - ANSWER an economic agent appointed to act on
behalf of smaller agents in collecting information and/or investing funds
, loan covenants - ANSWER legal clauses in a loan contract that require the
borrower to take or avoid certain actions
diversify - ANSWER the ability of an economic agent to reduce risk by
holding a number of securities in a portfolio
negative externality - ANSWER action by an economic agent that imposes
costs on other economic agents
net regulatory burden - ANSWER the difference between the private costs
of regulations and the private benefits for the producers of financial
services
outside money - ANSWER the part of the money supply directly produced
by the government or central bank, such as notes and coin
inside money - ANSWER the part of the money supply produced by the
private banking system
financial institutions (FIs) - ANSWER institutions that perform services
requiring transactions in the capital markets and/or financial intermediation
depository institutions (DIs, or financial intermediaries) - ANSWER financial
institutions that stand between savers and borrowers to facilitate borrowing
and lending
authorised depository institutions (ADIs) - ANSWER depository institutions
that have been granted an authority by APRA to operate in Australia
non-bank depository institutions (building societies and credit unions) -
ANSWER institutions that undertake many of the activities of a bank
without meeting the legal definition of a bank
covered bonds - ANSWER bonds issued by a bank, backed by a pool of
assets which remain on the balance sheet of the issuing bank
off-balance-sheet asset - ANSWER an item that moves onto the asset side
of the balance sheet when a contingent event occurs
ANSWERS RATED A+
liquidity - ANSWER the ease of converting an asset into cash
price risk - ANSWER the risk that the sale price of an asset will be lower
than the purchase price of that asset
Financial intermediary - ANSWER an entity that acts as the 'middle person'
between two parties in a financial transaction
economies of scale - ANSWER the concept that the cost reduction in
trading and other transaction services results from increased efficiency
when FIs perform these services
asset transformer - ANSWER an FI issues financial claims that are more
attractive to household savers than the claims directly issued by
corporations
primary securities - ANSWER securities issued by corporations and backed
by the real assets of those corporations
secondary securities - ANSWER securities issued by FIs and backed by
primary securities
agency costs - ANSWER costs relating to the risk that the owners and
managers of firms that receive savers' funds will take actions with those
funds contrary to the best interests of the savers
delegated monitor - ANSWER an economic agent appointed to act on
behalf of smaller agents in collecting information and/or investing funds
, loan covenants - ANSWER legal clauses in a loan contract that require the
borrower to take or avoid certain actions
diversify - ANSWER the ability of an economic agent to reduce risk by
holding a number of securities in a portfolio
negative externality - ANSWER action by an economic agent that imposes
costs on other economic agents
net regulatory burden - ANSWER the difference between the private costs
of regulations and the private benefits for the producers of financial
services
outside money - ANSWER the part of the money supply directly produced
by the government or central bank, such as notes and coin
inside money - ANSWER the part of the money supply produced by the
private banking system
financial institutions (FIs) - ANSWER institutions that perform services
requiring transactions in the capital markets and/or financial intermediation
depository institutions (DIs, or financial intermediaries) - ANSWER financial
institutions that stand between savers and borrowers to facilitate borrowing
and lending
authorised depository institutions (ADIs) - ANSWER depository institutions
that have been granted an authority by APRA to operate in Australia
non-bank depository institutions (building societies and credit unions) -
ANSWER institutions that undertake many of the activities of a bank
without meeting the legal definition of a bank
covered bonds - ANSWER bonds issued by a bank, backed by a pool of
assets which remain on the balance sheet of the issuing bank
off-balance-sheet asset - ANSWER an item that moves onto the asset side
of the balance sheet when a contingent event occurs
