Functions of FIs

what is not referred to transaction costs in direct finance?

• screening counter-party

• monitoring the borrowers

• obtaining information about the borrower

• get advice from borrower

What is true when describing asymmetric information in financial transaction?

• The borrowers have more information than the lenders

• The lenders have more information than the borrowers

• Both are true

• None of them is true

Fill the gap: Asymmetric information can create problems ...

• Before financial transaction

• After financial transaction

• Before and after financial transaction

What case is not implied asymmetric information?

• Not everyone has the same information;

• Every party has the same information

• Everyone has less than perfect information

• Some parties may have “insider information” which is not made available to both sides of the transaction.

what is not true about economics of scale?

• Product and service diversification can reduce cost

• Increasing volume of transactions, the cost per unit of transactions is reduced

• costs can be spread over a larger amount of transactions

• banks gain the cost advantages with the increase in a volume of transactions

what is true about economics of scope?

• Increasing volume of transactions, the cost per unit of transactions is reduced

• Product and service diversification can reduce cost

• costs can be spread over a larger amount of transactions

• banks gain the cost advantages with the increase in a volume of transactions

Fill the gap, FIs perform a size transformation function by pooling all ... deposits of all types of saver and then issuing ... loans to borrowers

• small, medium

• large, small

• small, large

• medium, large

How do banks reduce risk for depositors?

• Diversification their asset portfolio

• Screening and monitoring the borrowers

• Both

• None of them