Insurance and Risk Management

251. The idea behind a capital adequacy ratio is that banking risk should be borne by:

  1. Shareholders
  2. Creditors
  3. Managers
  4. Borrowers
  5. Directors

Correct answer: (a)
Shareholders

252. The interest yield on the treasury bill in question 2 is:

  1. 4.7%
  2. 0.8%
  3. 4.75%
  4. 8%
  5. 0.806%

Correct answer: (c)
4.75%

253. The Italian banking system was similar to the US system in the 1930s in which of the following ways?

  1. There were many small banks in both countries
  2. The Mafia controlled both systems
  3. Investment banking was kept separate from commercial banking in both countries
  4. The state played a major role in both systems
  5. The development of branch networks was discouraged in both systems

Correct answer: (A, C, D)
There were many small banks in both countries
Investment banking was kept separate from commercial banking in both countries
The state played a major role in both systems

, C, D

254. The largest item in the asset portfolio of German households in 2006 was:

  1. Bonds
  2. Insurance policies
  3. Unit trust certificates
  4. Company shares
  5. Bank deposits and currency

Correct answer: (B)
Insurance policies

255. The major institutional holders of equity in Sweden are:

  1. Mutual funds
  2. National Pension Fund
  3. Banks
  4. Insurance companies
  5. Mortgage credit institutes

Correct answer: (D)
Insurance companies

256. The ownership of ordinary company shares gives shareholders:

  1. A share in the management of the company
  2. A strong claim on the firm's assets in the event of insolvency
  3. A guaranteed rate of return
  4. The right to vote on specified issues concerning the firm
  5. The right to receive dividends

Correct answer: (A)
A share in the management of the company

257. The Phillips curve implied that there was a trade-off available to governments between:

  1. Inflation and unemployment
  2. Out put and employment
  3. The price level and unemployment
  4. Unemployment and inflation
  5. Output and unemployment
  6. The price level and employment

Correct answer: (A)
Inflation and unemployment

258. The real rate of interest required by investors is 3% p.a., inflation for the next year is expected to be 4% and the liquidity premium is 1% for every year to maturity. If the rate quoted on a two year loan is 11%, the risk premium must be:

  1. 9%
  2. 2%
  3. 4%
  4. 3%
  5. 7%

Correct answer: (D)
3%

259. The reason that finding the present value of a future sum of money requires us to discount it, is that:

  1. Inflation will reduce its purchasing power
  2. We can’t be certain of receiving it
  3. We don’t know when we shall receive it
  4. Waiting deprives us of its use
  5. Waiting involves risk

Correct answer: (D)
Waiting deprives us of its use

260. The recent structural changes in the US banking system have been the result of which five of the following:
(a) The depression of the 1930s
(b) Mergers and acquisitions
(c) Legislative changes affecting interstate expansion
(d) The growth of off-shore banking
(e) Legislative changes affecting expansion by branching
(f) The junk bonds collapse
(g) Failures of depository institutions
(h) The end of the IMF fixed exchange rate system
(i) Increased international capital flows
(j) Changes in credit union membership regulations

  1. (b), (c), (e), (g) and (i)
  2. (b), (c), (e), (h) and (j)
  3. (b), (c), (e), (i) and (j)
  4. (b), (c), (d), (g) and (j)
  5. (a), (c), (e), (g) and (j)
  6. (b), (c), (e), (g) and (j)

Correct answer: (F)
(b), (c), (e), (g) and (j)

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