ECO 316 Week 4 Quiz - All Questions Answered Correctly - Best Tutorial

Question 1.Securitization refers to 

•   changing the mix in a financial portfolio away from stocks and toward bonds.   
•   selling directly to investors loans or securities that were formerly held by financial intermediaries.   
•   banks insisting that collateral be supplied on previously unsecured loans.   
•   reducing the exposure of a bank's portfolio to interest rate risk.

Question 2.Excess reserves equal

•   total reserves less required reserves.   
•   required reserves less total reserves.   
•   total reserves plus required reserves.   
•   required reserves divided by total reserves.  

Question 3.Securities that banks sell and agree to repurchase are known as

•   federal funds.   
•   discount loans.   
•   repurchase agreements.   
•   NOW accounts.   

Question 4.The risk that increased market interest rates will cause a decline in the value of an investment bank's holdings of long-term securities is known as

•   credit risk.   
•   interest-rate risk.   
•   currency risk.   
•   security risk.   

Question 5.In managing its liabilities to deal with liquidity problems, banks trade off 

•   credit risk against interest rate risk.   
•   adverse selection against moral hazard.   
•   the need for available funds to meet deposit outflows against the desire for greater profit.   
•   present tax liabilities against future tax liabilities.

Question 6.The difference between a savings deposit and a time deposit is

•   time deposits pay no interest.   
•   savings deposits pay no interest.   
•   time deposits have specified maturities.   
•   savings deposits have specified maturities.  

Question 7.Any reserves beyond what is required are called 

•   required reserves.   
•   excess reserves.   
•   secondary reserves.   
•   bank capital.

Question 8.In order to reduce the likelihood of excessive leverage in the banking system, governments have traditionally 

•   imposed capital requirements on commercial banks.   
•   imposed capital requirement on investment banks.   
•   imposed capital requirements on both commercial and investment banks.   
•   imposed asset requirements on all banks.   

Question 9.Short-term loans between banks are called 

•   federal funds.   
•   repurchase agreements.   
•   repos.   
•   discount loans.   

Question 10.The development of new financial securities or investment strategies using sophisticated models is known as 

•   underwriting.   
•   factoring.   
•   financial engineering.   
•   hedging.