FIN 461 LATEST 2026 EVALUATION EXAM QUESTIONS AND
ANSWERS RATED A+
Depository financial institutions include all of the following EXCEPT
a. investment banks.
b. credit unions.
c. commercial banks.
d. savings banks.
e. all of the options are depository institutions. - ✔✔a. investment banks.
✔✔2. Nondepository financial institutions are represented by all of the following
EXCEPT
a. insurance companies.
b. credit unions.
c. mutual funds.
d. securities firms.
e. finance companies - ✔✔b. credit unions.
✔✔3. Which function of an FI reduces transaction and information costs between a
corporation and
individual which may encourage a higher rate of savings?
a. Asset transformation services.term-43
b. Administration of the payments mechanism.
c. Money supply management.
d. Brokerage services.
e. Information production services. - ✔✔d. Brokerage services.
✔✔4. Which of the following is NOT a major function of financial intermediaries?
a. Management of the nation's money supply.
b. Administration of the payments mechanism.
c. Brokerage services.
d. Information production.
e. Asset transformation services - ✔✔a. Management of the nation's money supply.
✔✔5. The reason FIs can offer highly liquid, low price-risk contracts to savers while
investing in relatively
illiquid and higher risk assets is
a. significant amounts of portfolio risk are diversified away by investing in assets
that have correlations between returns that are less than perfectly positive.
b. because diversification allows an FI to predict more accurately the expected
returns on its asset portfoterm-43lio.
c. because FIs have a cost advantage in monitoring their portfolios.
d. because individual savers cannot benefit from risk diversification.
e. All of the options. - ✔✔c. because FIs have a cost advantage in monitoring their
portfolios.
,✔✔6. The asset transformation function of FIs typically involves
a. granting loans to transform funds deficit units into funds surplus units.
b. receipt of securities through electronic payments systems.
c. investing short-term funds in off-balance sheet activities.
d. transferring of funds from one generation to another.
e. altering the liquidity and maturity features of funds sources used to finance the
FI's asset portfolio. - ✔✔e. altering the liquidity and maturity features of funds sources
used to finance the
FI's asset portfolio.
✔✔7. Which of the following refers to the term "maturity intermediation"?
a. Mismatching the maturities of assets and liabilities.
b. Reducing information costs or imperfections between households and
corporations.
c. The transfer of wealth from one generation to the next.
d. Creation of a secondary market mature enough to withstand volatility.
e. Overcoming constraints to buying assets imposed by large minimum
denomination size. - ✔✔a. Mismatching the maturities of assets and liabilities.
✔✔8. Which of the following measures the difference between the private costs of
regulations and the
private benefits of those regulations for the producers of financial services?
a. Capital adequacy.
b. Agency costs.
c. Liquidity risk.
d. Charter value.
e. Net regulatory burden - ✔✔e. Net regulatory burden
✔✔9. Net regulatory burden for FIs is higher because regulators may require the FI to
a. produce less information than would be produced without regulation.
b. hold fewer reserves than they would without regulation.
c. hold more capital than what would be held without regulation.
d. hold more debt than what would be held without regulation.
e. All of the options. - ✔✔c. hold more capital than what would be held without
regulation.
✔✔10. 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 produce timely accounting statements and reports.
b. the provision of deposit insurance.
c. encouraging banks to rely more on deposits rather than debt or capital as a
cushion against failure.
d. the periodic monitoring of banks.
, e. encouraging banks to limit lending to a single customer to no more than 10% of
capital. - ✔✔c. encouraging banks to rely more on deposits rather than debt or capital
as a
cushion against failure.
✔✔11. Which of the following repealed the 1933 Glass-Steagall barriers between
commercial banking,
insurance, and investment banking?
a. Financial Services Modernization Act (1999).
b. Financial Institutions Reform Recovery and Enforcement Act (1989).
c. Competitive Equality in Banking Act (1987).
d. The Bank Holding Company Act (1956).
e. Garn-St. Germain Depository Institutions Act (1982). - ✔✔a. Financial Services
Modernization Act (1999).
✔✔12. Which of the following FIs does not currently provide a payment function for their
customers?
a. Finance companies.
b. Mutual funds.
c. Insurance companies.
d. Depository institutions.
e. Pension funds. - ✔✔e. Pension funds.
✔✔13. The largest asset class on U.S. commercial banks' combined balance sheet as
of June 30, 2015 was
a. commercial and industrial loans.
b. cash.
c. deposits.
d. investment securities.
e. real estate loans. - ✔✔e. real estate loans.
✔✔14. The largest asset class on FDIC-insured savings institutions' balance sheet as of
mid-2015 was
a. cash.
b. mortgage loans.
c. investment securities.
d. deposits.
e. non-mortgage Loans. - ✔✔b. mortgage loans.
✔✔15. National-chartered commercial banks are most likely to be regulated by
a. the FDIC only.
b. the Federal Reserve System only.
c. the FDIC and the Federal Reserve System.
d. the FDIC, the Federal Reserve System, and the Comptroller of the Currency.
ANSWERS RATED A+
Depository financial institutions include all of the following EXCEPT
a. investment banks.
b. credit unions.
c. commercial banks.
d. savings banks.
e. all of the options are depository institutions. - ✔✔a. investment banks.
✔✔2. Nondepository financial institutions are represented by all of the following
EXCEPT
a. insurance companies.
b. credit unions.
c. mutual funds.
d. securities firms.
e. finance companies - ✔✔b. credit unions.
✔✔3. Which function of an FI reduces transaction and information costs between a
corporation and
individual which may encourage a higher rate of savings?
a. Asset transformation services.term-43
b. Administration of the payments mechanism.
c. Money supply management.
d. Brokerage services.
e. Information production services. - ✔✔d. Brokerage services.
✔✔4. Which of the following is NOT a major function of financial intermediaries?
a. Management of the nation's money supply.
b. Administration of the payments mechanism.
c. Brokerage services.
d. Information production.
e. Asset transformation services - ✔✔a. Management of the nation's money supply.
✔✔5. The reason FIs can offer highly liquid, low price-risk contracts to savers while
investing in relatively
illiquid and higher risk assets is
a. significant amounts of portfolio risk are diversified away by investing in assets
that have correlations between returns that are less than perfectly positive.
b. because diversification allows an FI to predict more accurately the expected
returns on its asset portfoterm-43lio.
c. because FIs have a cost advantage in monitoring their portfolios.
d. because individual savers cannot benefit from risk diversification.
e. All of the options. - ✔✔c. because FIs have a cost advantage in monitoring their
portfolios.
,✔✔6. The asset transformation function of FIs typically involves
a. granting loans to transform funds deficit units into funds surplus units.
b. receipt of securities through electronic payments systems.
c. investing short-term funds in off-balance sheet activities.
d. transferring of funds from one generation to another.
e. altering the liquidity and maturity features of funds sources used to finance the
FI's asset portfolio. - ✔✔e. altering the liquidity and maturity features of funds sources
used to finance the
FI's asset portfolio.
✔✔7. Which of the following refers to the term "maturity intermediation"?
a. Mismatching the maturities of assets and liabilities.
b. Reducing information costs or imperfections between households and
corporations.
c. The transfer of wealth from one generation to the next.
d. Creation of a secondary market mature enough to withstand volatility.
e. Overcoming constraints to buying assets imposed by large minimum
denomination size. - ✔✔a. Mismatching the maturities of assets and liabilities.
✔✔8. Which of the following measures the difference between the private costs of
regulations and the
private benefits of those regulations for the producers of financial services?
a. Capital adequacy.
b. Agency costs.
c. Liquidity risk.
d. Charter value.
e. Net regulatory burden - ✔✔e. Net regulatory burden
✔✔9. Net regulatory burden for FIs is higher because regulators may require the FI to
a. produce less information than would be produced without regulation.
b. hold fewer reserves than they would without regulation.
c. hold more capital than what would be held without regulation.
d. hold more debt than what would be held without regulation.
e. All of the options. - ✔✔c. hold more capital than what would be held without
regulation.
✔✔10. 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 produce timely accounting statements and reports.
b. the provision of deposit insurance.
c. encouraging banks to rely more on deposits rather than debt or capital as a
cushion against failure.
d. the periodic monitoring of banks.
, e. encouraging banks to limit lending to a single customer to no more than 10% of
capital. - ✔✔c. encouraging banks to rely more on deposits rather than debt or capital
as a
cushion against failure.
✔✔11. Which of the following repealed the 1933 Glass-Steagall barriers between
commercial banking,
insurance, and investment banking?
a. Financial Services Modernization Act (1999).
b. Financial Institutions Reform Recovery and Enforcement Act (1989).
c. Competitive Equality in Banking Act (1987).
d. The Bank Holding Company Act (1956).
e. Garn-St. Germain Depository Institutions Act (1982). - ✔✔a. Financial Services
Modernization Act (1999).
✔✔12. Which of the following FIs does not currently provide a payment function for their
customers?
a. Finance companies.
b. Mutual funds.
c. Insurance companies.
d. Depository institutions.
e. Pension funds. - ✔✔e. Pension funds.
✔✔13. The largest asset class on U.S. commercial banks' combined balance sheet as
of June 30, 2015 was
a. commercial and industrial loans.
b. cash.
c. deposits.
d. investment securities.
e. real estate loans. - ✔✔e. real estate loans.
✔✔14. The largest asset class on FDIC-insured savings institutions' balance sheet as of
mid-2015 was
a. cash.
b. mortgage loans.
c. investment securities.
d. deposits.
e. non-mortgage Loans. - ✔✔b. mortgage loans.
✔✔15. National-chartered commercial banks are most likely to be regulated by
a. the FDIC only.
b. the Federal Reserve System only.
c. the FDIC and the Federal Reserve System.
d. the FDIC, the Federal Reserve System, and the Comptroller of the Currency.
