FINA 465 EXAM 1 QUESTIONS AND CORRECT DETAILED
ANSWERS (VERIFIED ANSWERS) ALREADY GRADED A+
Adverse Selection Ans✓✓✓"All other things equal, who is more likely
to ask you for money, a person who tends to make good decisions, or
one who does not?"
(The customer who applies for insurance policies are more likely to be
those most in need of insurance)
Asymmetric Information Ans✓✓✓The borrower of funds has better
knowledge of the debt relationship than does the supplier of the funds
Bank holding company Ans✓✓✓Any company that directly or
indirectly owns, controls, or has the power to vote 25 percent or more of
any class of the voting shares of a bank; controls in any manner the
election of a majority of the directors or trustees of a bank; or is found to
exercise a controlling influence over the management or policies of a
bank.
Typically only the shares of the holding company are traded.
Bank Holding Company Act (1956) Ans✓✓✓1. Restricted the banking
and non banking acquisition activities of Multibank holding companies
2. Empowered the Fed reserve to regulate multibank holding companies
by:
, a. determining permissible activities
b. exercising supervisory authority
exercising chartering authority
conducting bank examinations
CAMELS rating system Ans✓✓✓(C)apital adequacy
(A)ssets
(M)anagement Capability
(E)arnings
(L)iquidity (also called asset liability management)
(S)ensitivity (sensitivity to market risk, especially interest rate risk)
Capital Markets Ans✓✓✓the part of a financial system concerned with
raising capital by dealing in shares, bonds, and other long-term
investments.
Central Bank Ans✓✓✓a national bank that provides financial and
banking services for its country's government and commercial banking
system, as well as implementing the government's monetary policy and
issuing currency.
Commercial Bank Ans✓✓✓a bank that offers services to the general
public and to companies.
ANSWERS (VERIFIED ANSWERS) ALREADY GRADED A+
Adverse Selection Ans✓✓✓"All other things equal, who is more likely
to ask you for money, a person who tends to make good decisions, or
one who does not?"
(The customer who applies for insurance policies are more likely to be
those most in need of insurance)
Asymmetric Information Ans✓✓✓The borrower of funds has better
knowledge of the debt relationship than does the supplier of the funds
Bank holding company Ans✓✓✓Any company that directly or
indirectly owns, controls, or has the power to vote 25 percent or more of
any class of the voting shares of a bank; controls in any manner the
election of a majority of the directors or trustees of a bank; or is found to
exercise a controlling influence over the management or policies of a
bank.
Typically only the shares of the holding company are traded.
Bank Holding Company Act (1956) Ans✓✓✓1. Restricted the banking
and non banking acquisition activities of Multibank holding companies
2. Empowered the Fed reserve to regulate multibank holding companies
by:
, a. determining permissible activities
b. exercising supervisory authority
exercising chartering authority
conducting bank examinations
CAMELS rating system Ans✓✓✓(C)apital adequacy
(A)ssets
(M)anagement Capability
(E)arnings
(L)iquidity (also called asset liability management)
(S)ensitivity (sensitivity to market risk, especially interest rate risk)
Capital Markets Ans✓✓✓the part of a financial system concerned with
raising capital by dealing in shares, bonds, and other long-term
investments.
Central Bank Ans✓✓✓a national bank that provides financial and
banking services for its country's government and commercial banking
system, as well as implementing the government's monetary policy and
issuing currency.
Commercial Bank Ans✓✓✓a bank that offers services to the general
public and to companies.
