Money & Banking Self-Assesment 1. Bank holding companies allows bankers to circu
ID: 2766328 • Letter: M
Question
Money & Banking Self-Assesment
1. Bank holding companies allows bankers to circumvent
A. Regulation Q
B. Interstate banking restrictions
C. Reserve requirements
D. None of the above
2. The Great Inflation affected the banking industry through the following channels
A. Lower nominal interest rates
B. Decline in deposits
C. Decreased competition among banks
D. All of the above
3. ARMs
A. Force borrowers to assume interest rate risk
B. Became more prevalent during The Great Inflation
C. Both of the above
D. Neither of the above
4. A bank can increase its level of reserves by
A. Selling securities
B. Increasing borrowings
C. Calling loans
D. All of the above
5. Which of the following is NOT a method banks use to control credit risk?
A. Credit rationing
B. Restrictive covenants
C. Specialization
D. They are all methods for controlling credit risk
6. Which of the following balance sheet entries is not sensitive to changes in market interest rates?
A. Bonds
B. Reserves
C. Mortgages
D. Borrowings
7. _______risk and _____risk for bank loans are essentially the same
A. Credit, interest rate
B. Default, credit
C. Interest rate, default
D. None of the above
8. Efficiency wages are ____ the level firms would have to pay to fill all their open positions.
A. Higher than
B. Lower than
C. Equal to
D. None of the above
9. Specialized lending helps lenders solve the problems of
A. Adverse selection
B. Moral hazard
C. Transactions costs
D. All of the above
10. Which of the following is a technique lenders use to alleviate assymetric information problems?
A. Specialized lending
B. Diversified lending
C. Requiring collateral
D. All of the above
Explanation / Answer
1.
The correct answer is option b. Interstate banking restrictions.
2.
The correct answer is option b. Decreased competition among banks
3.
The correct answer is option A. Force borrowers to assume interest rate risk.
4.
The correct answer is option A. Selling securities.
5.
The correct answer is option C. Specialization.
6.
The correct answer is option D. Borrowings.
7.
The correct answer is option A. Credit, interest rate.
8.
The correct answer is option B. Lower than.
9.
The correct answer is option B. Moral hazard.
10.
The correct answer is option A. Specialized lending.
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