Financial Institutions – Exam 2, 2026 – Study Material and Practice Questions
Which of the following is likely a result of increased interest-rate volatility? - correct answer ✔✔
An increase in demand for financial services and products
The following are the main sources for financial innovation except
promotion of bank regulations
avoidance of costly regulation
changes in demand conditions
changes in supply conditions - correct answer ✔✔ promotion of bank regulations
Which of the following financial innovations helped banks reduce their interest-rate risk that
came from the increased volatility of interest rates since the 1970s? - correct answer ✔✔
adjustable-rate mortgages and financial derivatives
As a result of strict banking regulations, the United States has: - correct answer ✔✔ many more
smaller banks when compared to other industrialised countries
How many Commercial banks are in the US? - correct answer ✔✔ 5,700
Bank failures have contributed to the decline in the number of banks. Another major reason is
the - correct answer ✔✔ prevalence of bank consolidation.
, How did competitive forces lead to the repeal of the Glass-Steagall Act's separation of the
banking and securities industries? (Check all that apply.)
The Act's restrictions put American banks at a competitive disadvantage relative to foreign
banks.
The Fed allowed bank holding companies to enter the underwriting business.
Banks were allowed to hold substantial equity stakes in commercial firms in order to keep them
competitive.
Financial innovation motivated banks and other financial institutions to bypass the intent of the
Glass-Steagall Act. - correct answer ✔✔ The Fed allowed bank holding companies to enter the
underwriting business.
Financial innovation motivated banks and other financial institutions to bypass the intent of the
Glass-Steagall Act.
The Act's restrictions put American banks at a competitive disadvantage relative to foreign
banks.
The following examples contributed to the erosion of the Glass-Steagall act except the
statement that indicates that
an executive order prohibited banks from purchasing securities.
the Federal Reserve introduced a loophole that affiliates of approved commercial banks used.
regulatory agencies allowed banks to engage in some real estate and insurance activities.
Which of the following is likely a result of increased interest-rate volatility? - correct answer ✔✔
An increase in demand for financial services and products
The following are the main sources for financial innovation except
promotion of bank regulations
avoidance of costly regulation
changes in demand conditions
changes in supply conditions - correct answer ✔✔ promotion of bank regulations
Which of the following financial innovations helped banks reduce their interest-rate risk that
came from the increased volatility of interest rates since the 1970s? - correct answer ✔✔
adjustable-rate mortgages and financial derivatives
As a result of strict banking regulations, the United States has: - correct answer ✔✔ many more
smaller banks when compared to other industrialised countries
How many Commercial banks are in the US? - correct answer ✔✔ 5,700
Bank failures have contributed to the decline in the number of banks. Another major reason is
the - correct answer ✔✔ prevalence of bank consolidation.
, How did competitive forces lead to the repeal of the Glass-Steagall Act's separation of the
banking and securities industries? (Check all that apply.)
The Act's restrictions put American banks at a competitive disadvantage relative to foreign
banks.
The Fed allowed bank holding companies to enter the underwriting business.
Banks were allowed to hold substantial equity stakes in commercial firms in order to keep them
competitive.
Financial innovation motivated banks and other financial institutions to bypass the intent of the
Glass-Steagall Act. - correct answer ✔✔ The Fed allowed bank holding companies to enter the
underwriting business.
Financial innovation motivated banks and other financial institutions to bypass the intent of the
Glass-Steagall Act.
The Act's restrictions put American banks at a competitive disadvantage relative to foreign
banks.
The following examples contributed to the erosion of the Glass-Steagall act except the
statement that indicates that
an executive order prohibited banks from purchasing securities.
the Federal Reserve introduced a loophole that affiliates of approved commercial banks used.
regulatory agencies allowed banks to engage in some real estate and insurance activities.
