Ch. 2 FI 412
Study online at https://quizlet.com/_hycjyf
1. Financial enterprises, more popularly referred to as financial institutions,
provide a variety of services. Which of the below is NOT one of these?
A) Transform financial assets acquired through the market and constituting
them into a different, and more widely preferable, type of asset-which becomes
their liability.
B) Exchange financial assets on behalf of customers but not for their own
accounts.
C) Manage the portfolios of other market participants.
D) Assist in the creation of financial assets for their customers, and then sell
those financial assets to other market participants.: B) Exchange financial assets on behalf
of customers but not for their own accounts.
2. Financial intermediaries include ________ that acquire the bulk of their funds
by offering their liabilities to the public mostly in the form of deposits; insur-
ance companies, pension funds, and finance companies.
A) depository institutions
B) utilities
C) initial public offerings
D) preferred equity instrument.: A) depository institutions
3. Some nonfinancial enterprises have subsidiaries that provide financial ser-
vices. These financial institutions are called ________.
A) free finance companies.
B) captive finance companies.
C) captive investment companies.
D) captive finance shares.: B) captive finance companies.
4. Depository institutions include ________.
A) commercial banks.
B) savings and loan associations.
C) savings banks and credit unions.
D) All of these: D) All of these
5. ) Financial intermediaries get funds by issuing financial claims against them-
selves to market participants, and then investing those funds. The investments
made by financial intermediaries can be in ________.
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, Ch. 2 FI 412
Study online at https://quizlet.com/_hycjyf
A) loans but not in securities.
B) securities but not in loans.
C) loans and/or securities.
D) only equity.: C) loans and/or securities.
6. Financial intermediaries play the basic role of transforming financial assets
that are less desirable for a large part of the public into other financial assets
(their own liabilities) which are more widely preferred by the public. This trans-
formation involves at least one of four economic functions. Which of the below
is NOT one of these functions?
A) providing maturity intermediation
B) enhancing risk via diversification
C) reducing the costs of contracting and information processing
D) providing a payments mechanism: B) enhancing risk via diversification
7. The commercial bank by issuing its own financial claims transforms a
longer-term asset into a shorter-term one by giving the borrower a loan for
the length of time sought and the investor/depositor a financial asset for the
desired investment horizon. This function of a financial intermediary is called
________.
A) diversification.
B) maturity intermediation.
C) information processing costs.
D) providing payment mechanisms.: B) maturity intermediation.
8. The economic function of financial intermediaries that transforms more risky
assets into less risky ones is called ________.
A) diversification.
B) maturity intermediation.
C) information processing costs.
D) providing payment mechanisms.: A) diversification.
9. The costs of writing loan contracts are referred to as ________.
A) asset costs.
B) loan costs.
2/7
Study online at https://quizlet.com/_hycjyf
1. Financial enterprises, more popularly referred to as financial institutions,
provide a variety of services. Which of the below is NOT one of these?
A) Transform financial assets acquired through the market and constituting
them into a different, and more widely preferable, type of asset-which becomes
their liability.
B) Exchange financial assets on behalf of customers but not for their own
accounts.
C) Manage the portfolios of other market participants.
D) Assist in the creation of financial assets for their customers, and then sell
those financial assets to other market participants.: B) Exchange financial assets on behalf
of customers but not for their own accounts.
2. Financial intermediaries include ________ that acquire the bulk of their funds
by offering their liabilities to the public mostly in the form of deposits; insur-
ance companies, pension funds, and finance companies.
A) depository institutions
B) utilities
C) initial public offerings
D) preferred equity instrument.: A) depository institutions
3. Some nonfinancial enterprises have subsidiaries that provide financial ser-
vices. These financial institutions are called ________.
A) free finance companies.
B) captive finance companies.
C) captive investment companies.
D) captive finance shares.: B) captive finance companies.
4. Depository institutions include ________.
A) commercial banks.
B) savings and loan associations.
C) savings banks and credit unions.
D) All of these: D) All of these
5. ) Financial intermediaries get funds by issuing financial claims against them-
selves to market participants, and then investing those funds. The investments
made by financial intermediaries can be in ________.
1/7
, Ch. 2 FI 412
Study online at https://quizlet.com/_hycjyf
A) loans but not in securities.
B) securities but not in loans.
C) loans and/or securities.
D) only equity.: C) loans and/or securities.
6. Financial intermediaries play the basic role of transforming financial assets
that are less desirable for a large part of the public into other financial assets
(their own liabilities) which are more widely preferred by the public. This trans-
formation involves at least one of four economic functions. Which of the below
is NOT one of these functions?
A) providing maturity intermediation
B) enhancing risk via diversification
C) reducing the costs of contracting and information processing
D) providing a payments mechanism: B) enhancing risk via diversification
7. The commercial bank by issuing its own financial claims transforms a
longer-term asset into a shorter-term one by giving the borrower a loan for
the length of time sought and the investor/depositor a financial asset for the
desired investment horizon. This function of a financial intermediary is called
________.
A) diversification.
B) maturity intermediation.
C) information processing costs.
D) providing payment mechanisms.: B) maturity intermediation.
8. The economic function of financial intermediaries that transforms more risky
assets into less risky ones is called ________.
A) diversification.
B) maturity intermediation.
C) information processing costs.
D) providing payment mechanisms.: A) diversification.
9. The costs of writing loan contracts are referred to as ________.
A) asset costs.
B) loan costs.
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