Question

1.An indirect transfer would include which of the following?

A. Boston National Bank accepts customer deposits in accounts that average about $1,000 each while making various loans that average about $50,000 each.
B. Northeastern Life Insurance Company sells a life insurance policy to Wendy, investing the premium in Intel.
C.      Mary lends George $100 who promises to repay when he receives his next paycheck.
D.     Alice buys 100 mutual fund shares. The mutual fund uses her money to buy additional stocks for the fund.
E.      Norman uses some of his pre-tax wages to put into his retirement account. The trustee of the account uses the money to buy bonds that mature in the year Norman expects to retire.

2.         A ______________ is a security that is a contract whose value is based on some mutually agreed upon other existing security.

A. primary security
B.      secondary security
C.      money market security
D.     capital market security
E.     derivative security

3.         With a(n) _____________________ transaction, no new funds are generated for the original issuer of the security.

A.     capital market
B.      secondary market
C.      capital market
D.     indirect
E.      direct

4.       Which of the following is not a factor in encouraging specific financial institutions to engage in other financial services like banking, brokerage, insurance, investment banking, and so forth?

A.     Changing regulations allow financial institutions to offer more financial services.
B.      The federal government requires them to do this.
C.      Global financial institutions have increased competition.
D.     There has been a increase in the need to manage the major risks at financial institutions.
E.      The cost of providing financial services is being reduced by improvements in technology.

5.     The ______________ are the most diversified type of depository institutions.

A.     Credit Unions.
B.      Savings Institutions
C.      Finance Companies
D.     Commercial Banks
E.      Mutual Funds

Answer 1

1. Answer is E.

Indirect Transfer means the disposition of an indirect ownership interest in an asset, fully or partially. Here, the trustee have an indirect control over the Norman's account. Hence, trustee will gain by investing the amount in bonds over that specified time period.

2. Answer is E.

Derivative Security is a contract whose value is derived from the value of an underlying asset as mutually agreed by parties involved which comprises of the predetermined amount and time.

3. Answer is B.

Secondary market is a place where securities are traded and there is a a Capital gain to the buyer and seller of the security. Thus, it doesn't generate any kind of funds to its original issuers.

4. answer is D.

Financial institutions requires major risk analysis from time to time which involves cost and time. Therefore, they are discouraged by this major factor in getting into other financial services.

5. Answer is E.

Mutual Funds offer portfolios with various type of securities which include both risky and non risky securities. Thus, it is more diversified in nature.