You start with a $1000 portfolio; it loses 40% over the next year, the following year it gains 50% in value; At the end of two years the worth of your portfolio will be:

• A) $600
• B) $1100
• C) $900
• D) $1000

We can calculate -------------------- of a bank by taking difference between bank’s assets and bank’s liabilities

• A) Net investment
• B) Net Worth
• C) Net borrower
• D) Vault cash

Financial intermediaries reduce which of these costs

• A) Information cost
• B) Transaction cost
• C) All of above
• D) Services cost

Which of the problem asymmetry information has to face during the proper flow of funds?

• A) Adverse selection
• B) All of above
• C) Moral hazard
• D) Borrower behavior in fund utilization

Which of the following is true regarding Return on equity (ROE) and leverage?

• A) Standard deviation and ROE show some time positive and some time negative relationship
• B) Standard deviation and ROE have no relationship
• C) Standard deviation and ROE have negative relationship
• D) Standard deviation and ROE have positive relationship

When one party takes benefit due to poor knowledge of other party it is called?

• A) Symmetry information
• B) Adverse selection
• C) Asymmetry information
• D) Moral hazard

What will be the Return on Equity of a bank if its net profit after tax is $27000 and bank’s capital is $174000?

• A) 17%
• B) 10.2%
• C) 6.4%
• D) 15.5%

Normally, which one of the following modes of financing is being practiced significantly and common all over the world?

• A) Direct financing
• B) Derivative financing
• C) All of above
• D) Indirect financing

Which of the following is not recommended solution for Moral Hazard?

• A) Apply restriction on borrower on used of amount
• B) Manger should be forced to report the owners
• C) None of the given options
• D) Manager must invest significant their own resources

Banks can also borrow by using a repurchase agreement or repo, which is a short-term _____________.

• A) Corporate loan
• B) Discount loan
• C) Collateralized loan
• D) Personal loan

An index number is a valuable tool because:

• A) The index is more stable than the data it reflects
• B) It does not require any calculations to compute percentage changes
• C) The index provides a meaningful measurement scale to calculate percentage changes
• D) The number by itself provides all of the useful information needed

Which one of the following is NOT non depository institution?

• A) Insurance Companies
• B) Credit unions
• C) Securities Firms
• D) Finance Companies

Often a bank will require a loan officer to make personal visits on customers with loans outstanding. This is encouraged because:

• A) The bank likely has excess funds available and hopes to make another loan to the business
• B) The bank worries about competitors trying to steal their customers
• C) This is an effective monitoring technique and should reduce moral hazard
• D) The bank wants to make sure the business is still there

In "gap analysis," the gap is the difference between a banks’s:

• A) Rate-sensitive assets and rate-sensitive liabilities
• B) Assets and liabilities
• C) Deposits and loans
• D) Long-term securities and short-term securities

------- are the institution normally increase credit extension more rapidly in the economy?

• A) Credit Unions
• B) Pension Funds
• C) Commercial banks
• D) Insurance companies

Which of the following is a role of a financial institution acting as a financial intermediary?

• A) Sending out free calendars at the holidays
• B) Formulating oversight regulations
• C) Lobbying legislators
• D) Pooling the resources of small savers

Which of the following is included in bank’s liabilities?

• A) Balances with other banks
• B) Deposits at the central bank
• C) Treasury bills
• D) Deposits of customers

Requiring a large deductible on the part of an insured is one way insurers treat the problem of:

• A) Free-riding
• B) The Lemons market
• C) Adverse selection
• D) Moral hazard

If Bubbles burst, what will be the effect on the economy?

• A) All of the given options
• B) It destabilize the real economy
• C) Growth of economy will be low
• D) Allocation of resources will be less efficient

Which of the following financing method is more important and popular in all over the world?

• A) Lease finance
• B) Running finance
• C) Direct finance
• D) Indirect finance