FINA 465 EXAM 1 REVIEW QUESTIONS
AND ANSWERS 100% PASS 2026/2027
Which of the following statements is FALSE?
A financial intermediary specializes in the production of information.
B. A financial intermediary reduces its risk exposure by pooling its assets.
C. A financial intermediary benefits society by providing a mechanism for payments.
D. A financial intermediary may act as a broker to bring together funds deficit and funds surplus
units.
E. A financial intermediary acts as a lender of last resort. - ANS E. A financial intermediary
acts as a lender of last resort.
True or False
As a delegated monitor, an FI's actions reduce agency costs. - ANS True
In its role as a delegated monitor, an FI...
A. keeps track of required interest and principal payments on loans it originates.
B. works with financially distressed borrowers in danger of defaulting on their loans.
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,C. holds portfolios of loans that they continue to service.
D. maintains contact with borrowers to ensure that loan proceeds are utilized for intended
purposes.
E. All of the options. - ANS E. All of the options.
Of the ten largest banks in the world at the beginning of 2015, how many were U.S. banks?
A. 0.
B. 1.
C. 2.
D. 4.
E. 8. - ANS B. 1
Many households place funds with financial institutions because many FI accounts provide...
A. lower denominations than other securities.
B. flexible maturities verses other interest-earning securities.
C. better liquidity than directly negotiated debt contracts.D. less price risk if interest rates
change.
E. All of the options. - ANS E. All of the options.
Negative externalities exist in the depository sector when...
A. the fear of DI insolvency leads to bank deposit runs.
B. lending activity is impaired or constrained.
C. there are delays in disbursements from insolvent DIs.
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, D. banks that are healthy suffer when another bank nears insolvency.
E. All of the options. - ANS E. All of the options.
Non-depository financial institutions are represented by all of the following EXCEPT...
A. insurance companies.
B. mutual funds.
C. finance companies.
D. credit unions.
E. securities firms. - ANS D. credit unions.
The following are protective mechanisms that have been developed by regulators to promote
the safety and soundness of the banking system EXCEPT...
A. encouraging banks to rely more on deposits rather than debt or capital as a cushion against
failure.
B. encouraging banks to limit lending to a single customer to no more than 10% of capital.
C. the provision of deposit insurance.
D. the periodic monitoring of banks.
E. encouraging banks to produce timely accounting statements and reports. - ANS A.
encouraging banks to rely more on deposits rather than debt or capital as a cushion against
failure.
What is a Money Center Bank? - ANS A bank located in a financial center such as New York or
San Francisco that deals in national and international financial markets.
- i.e. Citigroup or Wells Fargo.
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AND ANSWERS 100% PASS 2026/2027
Which of the following statements is FALSE?
A financial intermediary specializes in the production of information.
B. A financial intermediary reduces its risk exposure by pooling its assets.
C. A financial intermediary benefits society by providing a mechanism for payments.
D. A financial intermediary may act as a broker to bring together funds deficit and funds surplus
units.
E. A financial intermediary acts as a lender of last resort. - ANS E. A financial intermediary
acts as a lender of last resort.
True or False
As a delegated monitor, an FI's actions reduce agency costs. - ANS True
In its role as a delegated monitor, an FI...
A. keeps track of required interest and principal payments on loans it originates.
B. works with financially distressed borrowers in danger of defaulting on their loans.
@2026 ALLRIGHTS RESERVED 1
,C. holds portfolios of loans that they continue to service.
D. maintains contact with borrowers to ensure that loan proceeds are utilized for intended
purposes.
E. All of the options. - ANS E. All of the options.
Of the ten largest banks in the world at the beginning of 2015, how many were U.S. banks?
A. 0.
B. 1.
C. 2.
D. 4.
E. 8. - ANS B. 1
Many households place funds with financial institutions because many FI accounts provide...
A. lower denominations than other securities.
B. flexible maturities verses other interest-earning securities.
C. better liquidity than directly negotiated debt contracts.D. less price risk if interest rates
change.
E. All of the options. - ANS E. All of the options.
Negative externalities exist in the depository sector when...
A. the fear of DI insolvency leads to bank deposit runs.
B. lending activity is impaired or constrained.
C. there are delays in disbursements from insolvent DIs.
@2026 ALLRIGHTS RESERVED 2
, D. banks that are healthy suffer when another bank nears insolvency.
E. All of the options. - ANS E. All of the options.
Non-depository financial institutions are represented by all of the following EXCEPT...
A. insurance companies.
B. mutual funds.
C. finance companies.
D. credit unions.
E. securities firms. - ANS D. credit unions.
The following are protective mechanisms that have been developed by regulators to promote
the safety and soundness of the banking system EXCEPT...
A. encouraging banks to rely more on deposits rather than debt or capital as a cushion against
failure.
B. encouraging banks to limit lending to a single customer to no more than 10% of capital.
C. the provision of deposit insurance.
D. the periodic monitoring of banks.
E. encouraging banks to produce timely accounting statements and reports. - ANS A.
encouraging banks to rely more on deposits rather than debt or capital as a cushion against
failure.
What is a Money Center Bank? - ANS A bank located in a financial center such as New York or
San Francisco that deals in national and international financial markets.
- i.e. Citigroup or Wells Fargo.
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