Answer questions Essay Example

. All but one of the following are off-balance sheet activities of banks. Question 1

a. Repurchase agreements

b. Standby letters of credit

c. Loan brokerage

d. Securitisation.

. While time deposits are a banks’ major source of funds, their major use is Question 2

a. investments.

b. consumer loans.

c. demand deposits.

d. commercial loans.

. A bank expecting interest rates to rise in the future would prefer to make Question 3

a. fixed-rate loans

b. long-term, fixed rate loans

c. floating-rate loans adjusted infrequently

d. floating-rate loans adjusted frequently.

. The major assets of building societies are: Question 4

a. mortgage-backed securities.

b. construction loans.

c. residential mortgages.

d. cash and investment accounts.

. Credit union capital predominantly consists of Question 5

a. retained profits.

b. shareholders’ equity.

c. investment securities

d. retained profits and shareholders’ equity.

. Captive sales finance companies are: Question 6

a. finance companies that obtain their funds in large amounts and lend in small amounts.

b. finance companies that finance goods sold by their parent companies.

c. finance companies that specialise in a particular type of finance product.

d. finance companies that target individuals with excessive levels of personal debt.

. The term adverse selection was originally used in the life insurance industry and refers to a situation in which: Question 7

a. those at greatest risk of loss are more likely to insure than others.

b. information asymmetries exist between buyers and sellers.

c. risk adverse individuals are more likely to buy insurance.

d. insurance includes a covenant clause.

. Redlining traditionally refers to: Question 8

a. insurance companies refusing to issue insurance in particular geographical areas.

b. life insurance companies are stock companies.

c. the risk of immoral behaviour that has negative consequences because the person causing the problem does not suffer any (or much of the) loss or perhaps even benefits from it.

d. a situation in which two parties do not have the same information.

. A closed-end investment company initially: Question 9

a. sells its shares to government to obtain cash to invest and then operates with a fixed number of shares outstanding.

b. sells its shares to investment banks to obtain cash to invest and then operates with a fixed number of shares outstanding.

c. sells its shares to the public to obtain cash to invest and then operates with a fixed number of shares outstanding.

d. sells its shares to commercial banks to obtain cash to invest and then operates with a fixed number of shares outstanding.

. Under a defined benefits superannuation plan is: Question 10

a. a fund whose trustee has elected for it to become a public offer fund.

c a superannuation fund that pays out the sum of the contributions made by the employee and the earnings on those funds.
b. a superannuation plan in which the employer states the benefit that the employee will receive at retirement.

d. a plan offering superannuation products to the public, usually on a commercial basis

. Environmental, social and governance offers avenues for increasing returns, primarily through: Question 11

a. new revenue streams from new markets and products.

b. market positioning and reputation.

c. both a and b.

d. execution of trades, investment advice, and margin credit.

. Environmental, social and governance can create value for financial institutions by Question 12

a. mitigating risks.

b. reducing costs.

c. increasing returns.

d. all of the above.

Question B1

  1. Implementation of monetary policy is an important function of the Reserve Bank of Australia (RBA). Briefly explain the three objectives that the RBA intends to achieve by implementing the monetary policy.

  2. In the context of the financial markets, briefly explain the following terms:

  1. Allocational efficiency

  2. Informational efficiency

  3. Operational efficiency

  1. The flow of funds can be arranged either by direct financing or indirect financing. Briefly discuss the difference between direct financing and indirect financing.

  1. In the context of financial markets, briefly explain the terms ‘primary markets’ and ‘secondary markets’.

Question B2

money market.
money market securities issued by the businesses to theany three i. Businesses issue their securities to the money markets for raising short-term funds. Describe

ii. Ordinary shares and preference shares are two types of equity securities issued to the equity markets. Briefly discuss the differences between ordinary shares and preference shares.

iii. Treasury bond and Treasury indexed bond are two types of securities issued to the bond market on behalf of the Commonwealth government. Briefly explain the difference between Treasury bonds and Treasury indexed bonds.

Investors can place buy/sale orders in the stock markets either as ‘market order’ or as ‘limit order’. Briefly explain the difference between a market order and a limit order. . Iv

Question B3

  1. of funds for the commercial banks.
    Commercial banks are important financial institutions. Briefly explain main sources

off-balance-sheet activities of the Australian banks. any two ii During last two decades, there has been a substantial increase in the off-balance-sheet activities of the major banks.Describe

iii Briefly explain the following terms:

  1. Bridge loan

  2. Seasonal loan

  3. .iv Briefly discuss the profitability versus safety dilemma faced by the Australian banks

iv Briefly discuss the profitability versus safety dilemma faced by the Australian banks.

Question B4

types of finance companies.any three
i Finance companies is an important group of financial institutions. Briefly discuss

issues faced by the insurance industry.any three ii There are certain issues which can adversely affect the viability of the insurance industry. Discuss

. (any four requirements)iii Briefly discuss requirements of privately insurable risks

example of pure risk.
iv In the context of insurance industry, briefly explain the term ‘pure risk’. Provide an

Question B5

types of disability policies. any three i There are several types of disability policies offered by the insurance companies. Briefly discuss

reasons why sustainability is very important for the finance sector. any three ii Sustainability is important to the finance sector for various reasons. Briefly discuss

Briefly explain the term ‘climate change’.

activities by which finance sector engages in socially responsible behaviour.two anyiv Social issues are increasingly important for the finance sector. Briefly discuss