FINA 365-Exam 1 with Questions and Answers, Exams of Finance

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FINA 365-Exam 1 with Questions and Answers Depository institutions (DIs) play an important role in the transmission of monetary policy from the Federal Reserve to the rest of the economy primarily because a.) U.S. Dls compete with foreign financial institutions b.) bank loans are highly regulated c.) loans to corporations are part of the money supply d.) DI deposits are a major portion of the money supply .) savings institutions provide a large amount of credit to finance residential real estate ANSWERY ¥ d.) DI deposits are a major portion of the money supply Traditionally, regulation of FIs in the U.S. has been a.) minimal, as evidenced by the recent financial crisis b.) extensive, as a result of the importance of FI to the economy c.) minimal, because the free market is allowed to allocate financial resources d.) no different from regulation of nonfinancial firms e.) extensive, because banks have monopoly power ANSWERY ¥ b.) extensive, as a result of the importance of FI to the economy The origination of a home mortgage loan is considered to be a a.) secondary security, because mortgages are typically resold in the secondary market b.) primary security, because the mortgage note is a newly created security c.) derivative security because the value of the mortgage note depends on the underlying values of the home