FOUNDATIONS OF FINANCIAL
MANAGEMENT 18TH EDITION
PRACTICE SET 2026 CHAPTERS 1 TO
21 TESTED QUESTIONS AND
ACCURATE ANSWERS
◉ Nonbank financial-service institutions can offer deposits to the public,
but these deposits are not eligible for insurance coverage by the FDIC.
Answer: False
◉ According to the textbook, the largest banks tend to offer the widest
range of services of any financial service firm today. Answer: True
◉ The role performed by banks in the economy in which they transform
savings into credit is known as the intermediation role. Answer: True
◉ The role performed by banks in which they guarantee to make
payments on behalf of their customers when those customers are unable
to pay a debt obligation is known as the guarantor role. Answer: True
◉ The number of independently owned banks has risen in the United
States over the last decade. Answer: False
◉ Money-center banks usually service local communities, towns, and
cities, offering a narrow menu of services to the public Answer: False
, ◉ Lending institutions act as delegated monitors and can diversify and
reduce their risk exposure, resulting in increased safety for savers' funds.
Answer: True
◉ According to the textbook, traditional banking may be on the decline.
Answer: True
◉ Convergence refers to the fact that the number of bank mergers has
increased in recent years. Answer: False
◉ Banks which offer virtually all financial services are known as
universal banks. Answer: True
◉ Banks have now expanded their service offerings into providing
investment banking, insurance protection, financial planning, and other
services rather than restricting themselves to traditional financial
Answer: True
◉ Federal Reserve Act authorized the creation of the Federal Deposit
Insurance Corporation Answer: False
◉ In the United States, fixed fees charged for deposit insurance,
regardless of how risky a bank is, led to a problem known as moral
hazard. Answer: True
MANAGEMENT 18TH EDITION
PRACTICE SET 2026 CHAPTERS 1 TO
21 TESTED QUESTIONS AND
ACCURATE ANSWERS
◉ Nonbank financial-service institutions can offer deposits to the public,
but these deposits are not eligible for insurance coverage by the FDIC.
Answer: False
◉ According to the textbook, the largest banks tend to offer the widest
range of services of any financial service firm today. Answer: True
◉ The role performed by banks in the economy in which they transform
savings into credit is known as the intermediation role. Answer: True
◉ The role performed by banks in which they guarantee to make
payments on behalf of their customers when those customers are unable
to pay a debt obligation is known as the guarantor role. Answer: True
◉ The number of independently owned banks has risen in the United
States over the last decade. Answer: False
◉ Money-center banks usually service local communities, towns, and
cities, offering a narrow menu of services to the public Answer: False
, ◉ Lending institutions act as delegated monitors and can diversify and
reduce their risk exposure, resulting in increased safety for savers' funds.
Answer: True
◉ According to the textbook, traditional banking may be on the decline.
Answer: True
◉ Convergence refers to the fact that the number of bank mergers has
increased in recent years. Answer: False
◉ Banks which offer virtually all financial services are known as
universal banks. Answer: True
◉ Banks have now expanded their service offerings into providing
investment banking, insurance protection, financial planning, and other
services rather than restricting themselves to traditional financial
Answer: True
◉ Federal Reserve Act authorized the creation of the Federal Deposit
Insurance Corporation Answer: False
◉ In the United States, fixed fees charged for deposit insurance,
regardless of how risky a bank is, led to a problem known as moral
hazard. Answer: True
