Insurance and Risk Management

271. Using the symbols of Chapter 11, a reduction in the riskiness of a company's earnings, other things being equal, will be reflected in:

  1. A reduction in the market risk premium (Km- Krf)
  2. A rise in D
  3. A rise in the beta-coefficient
  4. A reduction in the beta-coefficient
  5. A reduction in g

Correct answer: (A)
A reduction in the market risk premium (Km- Krf)

272. Which of the following are bank assets?

  1. Customer deposits and advances to the general public
  2. Reserves and advances to the general public
  3. Investments and capital
  4. Reserves and customer deposits
  5. Notes and coin and customer deposits

Correct answer: (B)
Reserves and advances to the general public

273. Which of the following are characteristics of the US financial system?

  1. It has been dominated by large New York banks
  2. Modern firm's raise funds largely through the stock market
  3. It has had a history of bank collapses
  4. All banks are licensed by the Federal Reserve Board

Correct answer: (C)
It has had a history of bank collapses

274. Which of the following are depository institutions?

  1. Insurance companies
  2. Credit unions
  3. Money market mutual funds
  4. Savings and loan associations
  5. Investment banks
  6. Commercial banks

Correct answer: (B)
Credit unions

275. Which of the following are generally characteristics of bonds:

  1. Zero default risk and fixed coupon payments
  2. Fixed coupon payments and no fixed period to maturity
  3. No fixed period to maturity and variable coupon payments
  4. Zero capital risk and bi-annual coupons
  5. Prior claim on the assets of issuers and a fixed period to maturity

Correct answer: (E)
Prior claim on the assets of issuers and a fixed period to maturity

276. Which of the following institutions are classified as thrifts?

  1. Savings and loan associations
  2. State chartered banks
  3. Savings bank
  4. Credit unions
  5. Small commercial banks

Correct answer: (, C )
Savings and loan associations
Savings bank

, C

277. Which of the following is an 'AFB' bank:

  1. BNP-Paribas
  2. MONEP
  3. Crédit Mutuel
  4. Crédit Municipal

Correct answer: (A)
BNP-Paribas

278. Which of the following is likely to have the lowest degree of income risk for an investor investing for five years?

  1. Ordinary company shares
  2. A bank sight deposit
  3. Government bonds with ten years to maturity
  4. A succession of one year bank time deposits
  5. A succession of 3-month treasury bills

Correct answer: (C)
Government bonds with ten years to maturity

279. Which of the following is not a member of the European Monetary Union?

  1. Finland
  2. Denmark
  3. Norway
  4. Sweden

Correct answer: (C)
Norway

280. Which of the following makes US monetary policy?

  1. The Federal Reserve System
  2. The Federal Reserve Bank
  3. The Board of Governors of the Federal Reserve System
  4. None of the above

Correct answer: (D)
None of the above

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