Quiz for Banking course

1. What is the main role of financial intermediaries in an economy?

• Help to move funds from parties with missing capital to parties needing funds.

• Refers only to the collection of money from people.

• Provide a mechanism by which funds are transferred and allocated to their most productive opportunities.

• Control cash flows in circulation and makes more profit from transaction.

• Lend money to people only through its own capital

2. Which of the following belong to the benefits to ultimate lenders (surplus units)?

• Using financial intermediaries will generally involve lower transaction costs than would be incurred if borrowers had to approach ultimate lenders directly.

• When borrowing from financial intermediaries, there is a greater likelihood that loans will be available when required.

• Less risk is involved, due to the pooling of risk inherent in financial intermediation, the improved risk assessment that intermediaries are able to undertake, and the portfolio diversification that can frequently be achieved.

• cause a higher level of borrowing and lending to be undertaken, due to the lower risks and costs associated with lending to financial intermediaries;

• cause a more efficient utilization of funds within an economy, since the evaluation of lending opportunities will be improved;

3. Which of the following are deposit-taking institutions (DTIs)?

• Building societies.

• Insurance companies.

• Investment trust companies.

• Retail banks

• Pension funds.

4. _______________that involve depositing funds for a set period of time for a pre-determined

or variable rate of interest.

• Money market account

• Time or savings deposits

• Checking account

• Current account

• Transaction account

5. __________are the major financial intermediary in any economy. They are the main providers of credit to the household and corporate sector and operate the payments mechanism. ___________ are typically joint stock companies and may be either publicly listed on the stock exchange or privately owned.

• Saving banks

• Co-operative banks

• Commercial banks

• Building Society

• Credit union

6. In Islamic banking the basic rules governing the Musharakah contract is:

• to represent important trading intermediaries for clients as they help raise funds on the capital markets, manage investment portfolios and carry out strategic planning.

• an arrangement where a bank and a borrower establish a joint commercial enterprise and both contribute capital as well as labor and management as a general rule.

• aim to offer clients a spectrum of products and services that strengthen customer relationships and provide services that client’s value.

• relate to a bank underwriting the obligations of a third party and thereby assuming the risk of the transaction.

• to provide their corporate clients with asset management services, not only to manage a company’s own investments but also to manage the pension funds of the firm’s employees.

7. ___________involves transactions with non-residents in domestic currency that facilitates trade finance and other international transactions. __________involves banks undertaking wholesale (large-scale) foreign exchange transactions (loans and deposits) with both residents and non-residents.

• Eurocurrency and Multinational banking

• Traditional foreign and Eurocurrency banking

• Multinational and International banking

• Investment and Modern international banking

• Saving and Co-operative banking

8. What kind of trade finance are proved on the banking system to help facilitate the import and export of goods in international trading activity

• letter of credit, forfaiting and countertrade

• syndicated loan, invoice discounting and asset-based finance

• letter of security, factoring and barter

• exchange, eurodollar loan and factoring

• asset-based finance, forfaiting and countertrade

9. Money supply operating instrument

• is the policy tools used by a central bank to achieve specific monetary policy targets.

• are economic variables that are only indirectly under the control of a policymaker and that the policymaker analyses to determine whether a particular policy is having the anticipated effects on the economy as a whole.

• measures of overall economic performance, such as GDP growth, that are used to assess the impact or effectiveness of economic policies.

• to improve people's living standards and generate more income by bringing more money into the economy.

• is an instrument to control the growth of some measure of the money supply.

10. Everything else equal, if the growth rate of a country exceeds its sustainable rate, then the central bank:

• will keep interest rates low to keep the momentum.

• is likely to raise interest rates to slow the rate of growth.

• will now identify this new rate as the sustainable rate and try to maintain it.

• is like to decrease interest rate to increase the growth rate

• is likely to lower the interest rate thinking a slowdown is coming to offset this boom.