Lec 1-6

Asset transformation by financial intermediaries involves increasing the risk attributes of securities such as mortgages, bonds, and stocks.

• T
• F

The average cost incurred by financial institutions to collect information is larger than that of individuals.

• T
• F

Loans comprise the single largest asset category for a bank and being the main sources of bank’s revenue

• T
• F

Banks have higher leverage than most manufacturing firms.

• T
• F

Primary markets are markets in which users of funds raise cash by selling securities to funds suppliers.

• T
• F

Financial intermediation provides direct transfer of funds to the users.

• T
• F

The provision for loan loss account is the actual loan losses less loan recoveries in a given time period.

• T
• F

Secondary markets are markets used by corporations to raise cash by issuing securities for a short time period

• T
• F

On average, bank liabilities tend to have shorter maturities and greater liquidity than bank assets.

• T
• F

Reinvestment risk refers to the situation when interest rates decrease the value of fixed-income assets and increase the value of fixed-income liabilities.

• T
• F