Insurance and Risk Management

241. The 'clean price' of a bond is:

  1. The price when it is first issued
  2. The price including the interest which has accrued since the last coupon payment
  3. The price excluding accrued interest
  4. The price excluding the broker's commission
  5. The price net of tax

Correct answer: (C)
The price excluding accrued interest

242. The ability of central banks to influence short-term interest rates rests upon:

  1. Government policy
  2. Their role as lenders of last resort
  3. Their supervisory role
  4. Sales of government bonds
  5. Mandatory reserve ratios

Correct answer: (B)
Their role as lenders of last resort

243. The banking systems of Nordic countries are remarkable for their:

  1. Instability
  2. Economies of scale
  3. Mortgage lending
  4. Securities dealing
  5. Degree of market concentration

Correct answer: (E)
Degree of market concentration

244. The Caisses d'Epargne are:

  1. Mutual banks providing services to local authorities
  2. Private commercial banks
  3. Co-operative savings banks
  4. Mutual banks linked to particular economic activities

Correct answer: (C)
Co-operative savings banks

245. The conversion of building societies to PLC status allowed them:

  1. To raise funds by bond issues
  2. To raise capital by share issues
  3. To make personal loans
  4. To expand by merger
  5. To accept wholesale deposits

Correct answer: (B)
To raise capital by share issues

246. The demand for insurance derives from the fact that people want:

  1. The certainty of a good return
  2. To reduce the risk of accidents
  3. The possibility of a large loss to the certainty of a small one
  4. The possibility of generous compensation

Correct answer: (D)
The possibility of generous compensation

247. The essential characteristic that any monetary asset must possess is:

  1. Stable value
  2. Convenience
  3. Acceptability in exchange
  4. Classification as legal tender
  5. Divisibility

Correct answer: (C)
Acceptability in exchange

248. The federal insurance of deposits is:

  1. Compulsory for thrifts
  2. Compulsory for all banks
  3. Compulsory for nationally-chartered banks
  4. Voluntary for all banks
  5. Compulsory for state-chartered banks

Correct answer: (C)
Compulsory for nationally-chartered banks

249. The German banking system can be divided into 'specialised credit institutions' and:

  1. Co-operative banks
  2. 'Universal' banks
  3. Mortgage banks
  4. Foreign banks
  5. Savings banks

Correct answer: (B)
'Universal' banks

250. The Glass-Steagall Act:

  1. Set up the Federal Reserve system
  2. Prevented national banks from opening branches
  3. Made national banks subject to the same branching restrictions as applied to national banks
  4. Established the Federal Deposit Insurance Corporation (FDIC)
  5. Required commercial and investment banks to be kept separate

Correct answer: (D, E)

Established the Federal Deposit Insurance Corporation (FDIC)
Required commercial and investment banks to be kept separate

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