You want to deposit your money in the bank and bank lends it to the other person who need it. It is example of

• A) Indirect finance
• B) Direct finance
• C) Equity finance
• D) All of above

Which of the asymmetry information problem compel to the good companies out of market and focus will be shift to the average qualities?

• A) Adverse selection
• B) Moral hazard
• C) Standardized information
• D) None of above

If a bank earns $22,000 net profit after taxes and has $412,000 in assets, what is its return on assets ratio?

• A) 6.5%
• B) 18.72%
• C) 2.8%
• D) 5.3%

Credit risk arises as a result of which one of the following consequences?

• A) It arises because of sudden demands of funds
• B) It arises when banks make additional profit by using derivatives
• C) It arises when loan is not repaid
• D) It arises when two sides of the balance sheet do not match up

Adverse Selection is reduced due to ---------

• A) Avoiding the risk
• B) Classifying the applicant
• C) Screening the application
• D) Monitoring the debtor

In a financial market where information is symmetric:

• A) All of the given options
• B) The ability to obtain information is available to only one party
• C) One party to a transaction knows information the other party does not
• D) The same information would be known by both parties in a transaction

The operational components required for truly independent central banks include:

• A) Monetary policies cannot be reversed by anyone outside of the central bank
• B) The chairperson of the bank answerable only to the president
• C) Budget controlled by Congress
• D) The ability to have policies reversed

Banks provide various services e.g. they accept deposits, make loans, and provide mortgage etc. And the main objective of a bank is to ------------------- by providing these services.

• A) Serve clients
• B) Encourage investment
• C) Regulate the economy
• D) Earn profits

One reason given for more central bankers releasing their decisions publicly is:

• A) If monetary policy is going to be stabilizing speculation about central bankers decisions should be minimized
• B) So that central banks across the world can coordinate their policies
• C) To give people time to understand it
• D) Most people do not understand monetary policy so it really doesn't do any harm to release the decisions publicly

Without the ability of financial intermediaries to pool the resources of small savers:

• A) Borrowers needing large amounts of money would find it less costly to obtain the funds
• B) The risk associated with lending would increase
• C) The economy would likely grow faster
• D) People would likely save more

Which of the following stock valuation technique rely on the price trend in past?

• A) Value at risk (VAR)
• B) Chartist
• C) Behaviorist
• D) Fundamentalist

The broad class of securities firms includes which of the following?

• A) Brokerages
• B) Mutual fund companies
• C) All of the given options
• D) Investment banks

If State Bank purchases some U.S. Treasury bonds then we shall consider such bonds as being free of:

• A) All of the given options
• B) Credit risk
• C) Interest rate risk
• D) Reinvestment risk

By holding sufficient ------------------------ a bank can manage liquidity risk.

• A) Excess reserve
• B) Future contract
• C) Required reserve
• D) Letter of credit

Customers' accounts are included in which of the following category in a bank’s balance sheet.

• A) Reserves
• B) Assets
• C) Liabilities
• D) Capital

A foreign borrower may not repay the bank’s loan because his government is prohibiting him to repay that loan. Such risk is called:

• A) Value at risk
• B) Sovereign risk
• C) Trading risk
• D) Operational risk

Difference between the yield that a bank receives on its lending and the cost it bears on its borrowing is known as:

• A) Yield on equity
• B) Bank’s net borrowers
• C) Interest rate spread
• D) Bank’s Net worth

Which of the following is true of a nation's central bank?

• A) It has many interactions with the nation's citizens and businesses
• B) It is responsible for conducting the nation's monetary policy
• C) It lends only to the nation's largest and most important business firms
• D) It makes important decisions about the nation's tax and public spending policies

The risk of "insolvency" is basically the risk of:

• A) Machinery breakdowns
• B) Borrowers not paying off lenders in a timely fashion
• C) Asset value falling below liability value
• D) Not being able to find a buyer for an asset

Which of the following market deals with fund transfer form those who have excess funds to those who have shortage of funds?

• A) Derivative exchange markets
• B) Fund-available markets
• C) Real markets
• D) Financial markets