Downloaded by Collins Mwaniki ()
,Downloaded by Collins Mwaniki ()
,1.
A loan covenant is:
A. a legal clause in a borrowing contract that requires the lender to avoid certain actions
B. a legal clause in a borrowing contract that requires the lender to take certain actions
C. a legal clause in a borrowing contract that requires the borrower to take certain actions
D. a legal clause in a borrowing contract that requires the borrower to either take certain actions or avoid certain actions
AACSB: Analytic
Bloom's: Knowledge
Difficulty: Medium
Est time: 1–3
Learning Objective: 1.5 Understand how the failure of FIs to perform the specialist functions of risk measurement and management can lead to systemic
risk in the domestic and global financial systems
2.
When a DI makes a shift from an 'originate-to-hold' banking model to an 'originate-to-distribute' banking model, the change is likely to
result in:
A.
increased operating costs
B. increased interest rate and liquidity risk
C. decreased monitoring costs
D. decreased fee income
AACSB: Analytic
Bloom's: Application
Difficulty: Medium
Est time: 1–3
Learning Objective: 1.5 Understand how the failure of FIs to perform the specialist functions of risk measurement and management can lead to systemic
risk in the domestic and global financial systems
3.
In the traditional 'originate-to-hold' banking model, where a DI takes short-term deposits and uses them to make loans, the bank
usually holds these loans until maturity. This exposes the bank to increased:
A. operating costs
B. interest rate and liquidity risk
C. monitoring costs
D. All of the listed options are correct.
AACSB: Analytic
Bloom's: Application
Difficulty: Medium
Est time: 1–3
Learning Objective: 1.5 Understand how the failure of FIs to perform the specialist functions of risk measurement and management can lead to systemic
risk in the domestic and global financial systems
Downloaded by Collins Mwaniki ()
, 4.
FIs perform their intermediary function in two ways:
A. They specialise as brokers between savers and users and they directly control the quantity of outside money in the
economy.
B. They serve as asset transformers by purchasing primary securities and issuing secondary securities and by purchasing
secondary securities and issuing primary securities.
C. They serve as asset transformers by purchasing secondary securities and issuing primary securities and they directly
control the quantity of outside money in the economy.
D. They specialise as brokers between savers and users and they serve as asset transformers by purchasing primary
securities and issuing secondary securities.
AACSB: Analytic
Bloom's: Application
Difficulty: Medium
Est time: 1–3
Learning Objective: 1.1 Understand why financial institutions (FIs) are different from commercial firms
Learning Objective: 1.2 Learn how financial institutions—especially banks—provide a special set of services to households and firms, and the uniqueness
of these services
5.
Price risk refers to:
A. the risk that the sale price of an asset will be lower than the purchase price of that asset.
B. the risk that the purchase price of an asset will be lower than the sale price of that asset.
C. the risk that the sale price of an asset will be higher than the purchase price of that asset.
D. None of the listed options are correct.
AACSB: Analytic
Bloom's: Knowledge
Difficulty: Medium
Est time: 1–3
Learning Objective: 1.2 Learn how financial institutions—especially banks—provide a special set of services to households and firms, and the uniqueness
of these services
6.
Economies of scale is the concept that:
A. a cost reduction in trading and other transaction services results from increased efficiency when FIs perform these
services.
B. a profitability decrease in trading and other transaction services results from increased efficiency when FIs perform
these services.
C. a cost reduction in trading and other transaction services results from stable efficiency when FIs perform these services.
D. None of the listed options are correct.
AACSB: Analytic
Bloom's: Knowledge
Difficulty: Medium
Est time: 1–3
Learning Objective: 1.2 Learn how financial institutions—especially banks—provide a special set of services to households and firms, and the uniqueness
of these services
Downloaded by Collins Mwaniki ()
,Downloaded by Collins Mwaniki ()
,1.
A loan covenant is:
A. a legal clause in a borrowing contract that requires the lender to avoid certain actions
B. a legal clause in a borrowing contract that requires the lender to take certain actions
C. a legal clause in a borrowing contract that requires the borrower to take certain actions
D. a legal clause in a borrowing contract that requires the borrower to either take certain actions or avoid certain actions
AACSB: Analytic
Bloom's: Knowledge
Difficulty: Medium
Est time: 1–3
Learning Objective: 1.5 Understand how the failure of FIs to perform the specialist functions of risk measurement and management can lead to systemic
risk in the domestic and global financial systems
2.
When a DI makes a shift from an 'originate-to-hold' banking model to an 'originate-to-distribute' banking model, the change is likely to
result in:
A.
increased operating costs
B. increased interest rate and liquidity risk
C. decreased monitoring costs
D. decreased fee income
AACSB: Analytic
Bloom's: Application
Difficulty: Medium
Est time: 1–3
Learning Objective: 1.5 Understand how the failure of FIs to perform the specialist functions of risk measurement and management can lead to systemic
risk in the domestic and global financial systems
3.
In the traditional 'originate-to-hold' banking model, where a DI takes short-term deposits and uses them to make loans, the bank
usually holds these loans until maturity. This exposes the bank to increased:
A. operating costs
B. interest rate and liquidity risk
C. monitoring costs
D. All of the listed options are correct.
AACSB: Analytic
Bloom's: Application
Difficulty: Medium
Est time: 1–3
Learning Objective: 1.5 Understand how the failure of FIs to perform the specialist functions of risk measurement and management can lead to systemic
risk in the domestic and global financial systems
Downloaded by Collins Mwaniki ()
, 4.
FIs perform their intermediary function in two ways:
A. They specialise as brokers between savers and users and they directly control the quantity of outside money in the
economy.
B. They serve as asset transformers by purchasing primary securities and issuing secondary securities and by purchasing
secondary securities and issuing primary securities.
C. They serve as asset transformers by purchasing secondary securities and issuing primary securities and they directly
control the quantity of outside money in the economy.
D. They specialise as brokers between savers and users and they serve as asset transformers by purchasing primary
securities and issuing secondary securities.
AACSB: Analytic
Bloom's: Application
Difficulty: Medium
Est time: 1–3
Learning Objective: 1.1 Understand why financial institutions (FIs) are different from commercial firms
Learning Objective: 1.2 Learn how financial institutions—especially banks—provide a special set of services to households and firms, and the uniqueness
of these services
5.
Price risk refers to:
A. the risk that the sale price of an asset will be lower than the purchase price of that asset.
B. the risk that the purchase price of an asset will be lower than the sale price of that asset.
C. the risk that the sale price of an asset will be higher than the purchase price of that asset.
D. None of the listed options are correct.
AACSB: Analytic
Bloom's: Knowledge
Difficulty: Medium
Est time: 1–3
Learning Objective: 1.2 Learn how financial institutions—especially banks—provide a special set of services to households and firms, and the uniqueness
of these services
6.
Economies of scale is the concept that:
A. a cost reduction in trading and other transaction services results from increased efficiency when FIs perform these
services.
B. a profitability decrease in trading and other transaction services results from increased efficiency when FIs perform
these services.
C. a cost reduction in trading and other transaction services results from stable efficiency when FIs perform these services.
D. None of the listed options are correct.
AACSB: Analytic
Bloom's: Knowledge
Difficulty: Medium
Est time: 1–3
Learning Objective: 1.2 Learn how financial institutions—especially banks—provide a special set of services to households and firms, and the uniqueness
of these services
Downloaded by Collins Mwaniki ()
