金融市场与机构(15)

PAGE202  Mishkin/Eakins • FinancialMarketsandInstitutions,FifthEditionChapter15 WhyDoFinancialInstitutionsExist?  PAGE201Chapter15WhyDoFinancialInstitutionsExist? MultipleChoiceQuestions1.OfthefollowingsourcesofexternalfinanceforAmericannonfinancialbusinesses,theleastimportantis(a)loansfrombanks.(b)stocks.(c)bondsandcommercialpaper.(d)nonbankloans.Answer:B2.OfthefollowingsourcesofexternalfinanceforAmericannonfinancialbusinesses,themostimportantis(a)loansfrombanks.(b)stocks.(c)bondsandcommercialpaper.(d)nonbankloans.Answer:D3.OfthesourcesofexternalfundsfornonfinancialbusinessesintheUnitedStates,bondsaccountforapproximately_________ofthetotal.(a)10percent(b)20percent(c)30percent(d)50percentAnswer:C4.OfthesourcesofexternalfundsfornonfinancialbusinessesintheUnitedStates,stocksaccountforapproximately_________ofthetotal.(a)10percent(b)20percent(c)30percent(d)40percentAnswer:A5.WithregardtoexternalsourcesoffinancingfornonfinancialbusinessesintheUnitedStates,whichofthefollowingareaccuratestatements?(a)MarketablesecuritiesaccountforalargershareofexternalbusinessfinancingintheUnitedStatesthaninmostothercountries.(b)Since1970,lessthan5percentofnewlyissuedcorporatebondsandcommercialpaperhavebeensolddirectlytoAmericanhouseholds.(c)ThestockmarketaccountedforthelargestshareofthefinancingofAmericanbusinessesinthe1970–2000period.(d)Alloftheabove.(e)Only(a)and(b)oftheabove.Answer:E6.WithregardtoexternalsourcesoffinancingfornonfinancialbusinessesintheUnitedStates,whichofthefollowingareaccuratestatements?(a)Directfinanceisusedinlessthan5percentoftheexternalfinancingofAmericanbusinesses.(b)Onlylarge,well-establishedcorporationshaveaccesstosecuritiesmarketstofinancetheiractivities.(c)LoansfrombanksandotherfinancialintermediariesintheUnitedStatesprovidefivetimesmorefinancingofcorporateactivitiesthandostockmarkets.(d)Alloftheabove.(e)Only(a)and(b)oftheabove.Answer:D7.(I)IntheUnitedStatesnonbankloansarethemostimportantsourceofexternalfundsfornonfinancialbusinesses.(II)InGermanyandJapan,issuingstocksandbondsisthemostimportantsourceofexternalfornonfinancialbusinesses.(a)(I)istrue,(II)false.(b)(I)isfalse,(II)true.(c)Botharetrue.(d)Botharefalse.Answer:A8.Whichofthefollowingisnotoneoftheeightbasicfactsaboutfinancialstructure?(a)Debtcontractsaretypicallyextremelycomplicatedlegaldocumentsthatplacesubstantialrestrictionsonthebehavioroftheborrower.(b)Indirectfinance,whichinvolvestheactivitiesoffinancialintermediaries,ismanytimesmoreimportantthandirectfinance,inwhichbusinessesraisefundsdirectlyfromlendersinfinancialmarkets.(c)Collateralisaprevalentfeatureofdebtcontractsforbothhouseholdsandbusiness.(d)Newsecurityissuesarethemostimportantsourceofexternalfundstofinancebusinesses.Answer:D9.Whichofthefollowingisnotoneoftheeightbasicfactsaboutfinancialstructure?(a)Thefinancialsystemisamongthemostheavilyregulatedsectorsoftheeconomy.(b)Issuingmarketablesecuritiesistheprimarywaybusinessesfinancetheiroperations.(c)Indirectfinance,whichinvolvestheactivitiesoffinancialintermediaries,ismanytimesmoreimportantthandirectfinance,inwhichbusinessesraisefundsdirectlyfromlendersinfinancialmarkets.(d)Financialintermediariesarethemostimportantsourceofexternalfundstofinancebusinesses.Answer:B10.Becauseinformationisscarce,(a)equitycontractsareusedmuchmorefrequentlytoraisecapitalthanaredebtcontracts.(b)monitoringmanagersgivesrisetocostlystateverification.(c)governmentregulations,suchasstandardaccountingprinciples,canhelpreducemoralhazard.(d)alloftheabovearetrue.(e)only(b)and(c)oftheabovearetrue.Answer:E11.Whichofthefollowingbestexplainstherecentdeclineintheroleoffinancialintermediaries?(a)Privateproductionandsaleofinformation(b)Governmentregulationtoincreaseinformation(c)Improvementsininformationtechnology(d)NoneoftheabovecanexplaintherecentdeclineAnswer:C12.(I)Thetotalcostofcarryingoutatransactioninfinancialmarketsincreasesproportionallywiththesizeofthetransaction.(II)Financialintermediariesfacilitatediversificationwhenaninvestorhasonlyasmallsumtoinvest.(a)(I)istrue;(II)isfalse(b)(I)isfalse;(II)istrue(c)Both(I)and(II)aretrue(d)Both(I)and(II)arefalseAnswer:B13.Ifbadcreditrisksaretheoneswhomostactivelyseekloansand,therefore,receivethemfromfinancialintermediaries,thenfinancialintermediariesfacetheproblemof(a)moralhazard.(b)adverseselection.(c)free-riding.(d)costlystateverification.Answer:B14.Ifborrowerstakeonbigrisksafterobtainingaloan,thenlendersfacetheproblemof(a)free-riding.(b)adverseselection.(c)moralhazard.(d)costlystateverification.Answer:C15.Becauseofthelemonsproblemintheusedcarmarket,theaveragequalityoftheusedcarsofferedforsalewillbe_________,whichgivesrisetotheproblemof_________.(a)low;moralhazard(b)low;adverseselection(c)high;moralhazard(d)high;adverseselectionAnswer:B16.Intheusedcarmarket,asymmetricinformationleadstothelemonsproblembecausethepricethatbuyersarewillingtopaywill(a)reflectthehighestqualityofusedcarsinthemarket.(b)reflectthelowestqualityofusedcarsinthemarket.(c)reflecttheaveragequalityofusedcarsinthemarket.(d)noneoftheabove.Answer:C17.Theproblemcreatedbyasymmetricinformationbeforethetransactionoccursiscalled_________,whiletheproblemcreatedafterthetransactionoccursiscalled_________(a)adverseselection;moralhazard.(b)moralhazard;adverseselection.(c)costlystateverification;free-riding.(d)free-riding;costlystateverification.Answer:A18.Aborrowerwhotakesoutaloanusuallyhasbetterinformationaboutthepotentialreturnsandriskoftheinvestmentprojectsheplanstoundertakethandoesthelender.Thisinequalityofinformationiscalled(a)moralhazard.(b)asymmetricinformation.(c)noncollateralizedrisk.(d)adverseselection.Answer:B19.Adverseselectionisaproblemassociatedwithequityanddebtcontractsarisingfrom(a)thelender’srelativelackofinformationabouttheborrower’spotentialreturnsandrisksofhisinvestmentactivities.(b)thelender’sinabilitytolegallyrequiresufficientcollateraltocovera100percentlossiftheborrowerdefaults.(c)theborrower’slackofincentivetoseekaloanforhighlyriskyinvestments.(d)noneoftheabove.Answer:A20.Moralhazardisaproblemassociatedwithdebtandequitycontractsarisingfrom(a)theborrower’sincentivetoundertakehighlyriskyinvestments.(b)theowners’inabilitytoensurethatmanagerswillactintheowners’interest.(c)thedifficultylendershaveinsortingoutgoodcreditrisksfrombadcreditrisks.(d)alloftheabove.(e)only(a)and(b)oftheabove.Answer:E21.Becauseoftheadverseselectionproblem,(a)lendersmaymakeadisproportionateamountofloanstobadcreditrisks.(b)lendersmayrefuseloanstoindividualswithlownetworth.(c)lendersarereluctanttomakeloansthatarenotsecuredbycollateral.(d)alloftheabove.Answer:D22.Becauseoftheadverseselectionproblem,(a)goodcreditrisksaremorelikelytoseekloans,causinglenderstomakeadisproportionateamountofloanstogoodcreditrisks.(b)lendersmayrefuseloanstoindividualswithhighnetworth,becauseoftheirgreaterproclivityto“skiptown.”(c)lendersarereluctanttomakeloansthatarenotsecuredbycollateral.(d)alloftheabove.Answer:C23.Theproblemofadverseselectionhelpstoexplain(a)whybanksprefertomakeloanssecuredbycollateral.(b)whybankshaveacomparativeadvantageinraisingfundsforAmericanbusinesses.(c)whyborrowersarewillingtooffercollateraltosecuretheirpromisestorepayloans.(d)alloftheabove.(e)only(a)and(b)oftheabove.Answer:D24.Theproblemofadverseselectionhelpstoexplain(a)whichfirmsaremorelikelytoobtainfundsfrombanksandotherfinancialintermediaries,ratherthanfromsecuritiesmarkets.(b)whycollateralisanimportantfeatureofconsumer,butnotbusiness,debtcontracts.(c)whydirectfinanceismoreimportantthanindirectfinanceasasourceofbusinessfinance.(d)only(a)and(b)oftheabove.Answer:A25.Theconceptofadverseselectionhelpstoexplain(a)whycollateralisnotacommonfeatureofmanydebtcontracts.(b)whylarge,well-establishedcorporationsfinditsodifficulttoborrowfundsinsecuritiesmarkets.(c)whyfinancialmarketsareamongthemostheavilyregulatedsectorsoftheeconomy.(d)alloftheabove.Answer:C26.Thatmostusedcarsaresoldbyintermediaries(i.e.,usedcardealers)providesevidencethattheseintermediaries(a)havebeenaffordedspecialgovernmenttreatment,sinceusedcardealersdonotprovideinformationthatisvaluedbyconsumersofusedcars.(b)areabletopreventpotentialcompetitorsfromfree-ridingofftheinformationthattheyprovide.(c)havefailedtosolveadverseselectionproblemsinthismarketbecause“lemons”continuetobetraded.(d)doalloftheabove.Answer:B27.Thatmostusedcarsaresoldbyintermediaries(i.e.,usedcardealers)providesevidencethattheseintermediaries(a)provideinformationthatisvaluedbyconsumersofusedcars.(b)areabletopreventothersfromfree-ridingofftheinformationthattheyprovide.(c)canprofitbybecomingexpertsindeterminingwhetheranautomobileisagoodcaroralemon.(d)doalloftheabove.Answer:D28.Akeyfindingoftheeconomicanalysisoffinancialstructureisthat(a)theexistenceofthefree-riderproblemfortradedsecuritieshelpstoexplainwhybanksplayapredominantroleinfinancingtheactivitiesofbusinesses.(b)whilefree-riderproblemslimittheextenttowhichsecuritiesmarketsfinancesomebusinessactivities,neverthelessthemajorityoffundsgoingtobusinessesarechanneledthroughsecuritiesmarkets.(c)giventhegreatextenttowhichsecuritiesmarketsareregulated,free-riderproblemsarenotofsignificanteconomicconsequenceinthesemarkets.(d)economistsdonothaveaverygoodexplanationforwhysecuritiesmarketsaresoheavilyregulated.Answer:A29.IntheUnitedStates,thegovernmentagencyrequiringthatfirms,whichsellsecuritiesinpublicmarkets,adheretostandardaccountingprinciplesanddiscloseinformationabouttheirsales,assets,andearningsisthe(a)FederalCorporateSecuritiesCommission.(b)FederalTradeCommission.(c)SecuritiesandExchangeCommission.(d)U.S.TreasuryDepartment.(e)FederalReserveSystem.Answer:C30.Anauditcertifiesthat(a)afirm’sloanswillberepaid.(b)afirm’ssecuritiesaresafeinvestments.(c)afirmabidesbystandardaccountingprinciples.(d)theinformationreportedinafirm’saccountingstatementsiscorrect.Answer:C31.Theauthors’analysisofadverseselectionindicatesthatfinancialintermediariesingeneral,andbanksinparticular(becausetheyholdalargefractionofnon-tradedloans),(a)haveadvantagesinovercomingthefree-riderproblem,helpingtoexplainwhyindirectfinanceisamoreimportantsourceofbusinessfinancethanisdirectfinance.(b)playagreaterroleinmovingfundstocorporationsthandosecuritiesmarketsasaresultoftheirabilitytoovercomethefree-riderproblem.(c)providebetter-knownandlargercorporationsahigherpercentageoftheirexternalfundsthantheydotonewerandsmallercorporations,whichrelytoagreaterextentonthenewissuesmarketforfunds.(d)alloftheabove.(e)only(a)and(b)oftheabove.Answer:E32.Theauthors’analysisofadverseselectionindicatesthatfinancialintermediaries(a)overcomefree-riderproblemsbyholdingnon-tradedloans.(b)mustbuysecuritiesfromcorporationstodiversifytheriskthatresultsfromholdingnon-tradableloans.(c)havenotbeenverysuccessfulindealingwithadverseselectionproblemsinfinancialmarkets.(d)doalloftheabove.(e)doonly(a)and(b)oftheabove.Answer:A33.Thepeckingorderhypothesispredictsthatthe_________acorporationis,themorelikelyitwillbeto_________.(a)smallerandlesswellknown;issuesecurities(b)largerandmorewellknown;borrowfromfinancialintermediaries(c)largerandmorewellknown;issuesecurities(d)smallerandlesswellknown;needexternalfinancingAnswer:C34.Financialintermediariesand,particularly,bankshavetheabilitytoavoidthefree-riderproblemaslongastheyprimarily(a)makeprivateloans.(b)acquireadiversifiedportfolioofstocks.(c)buyjunkbonds.(d)doabalancedcombinationof(a)and(b)oftheabove.Answer:A35.Propertythatispledgedtothelenderintheeventthataborrowercannotmakehisorherdebtpaymentiscalled(a)points.(b)interest.(c)collateral.(d)goodfaithmoney.Answer:C36.Collateralis(a)propertythatispledgedtothelenderifaborrowercannotmakehisorherdebtpayments.(b)aprevalentfeatureofdebtcontractsforhouseholds.(c)aprevalentfeatureofdebtcontractsforbusiness.(d)alloftheabove.(e)only(a)and(c)oftheabove.Answer:D37.ThemajorityofhouseholddebtintheUnitedStatesconsistsof(a)creditcarddebt.(b)consumerinstallmentdebt.(c)collateralizedloans.(d)unsecuredloans,suchasstudentloans.Answer:C38.Commercialandfarmmortgages,inwhichpropertyispledgedascollateral,accountfor(a)one-quarterofborrowingbynonfinancialbusinesses.(b)one-halfofborrowingbynonfinancialbusinesses.(c)one-twentiethofborrowingbynonfinancialbusinesses.(d)two-thirdsofborrowingbynonfinancialbusinesses.Answer:A39.Becauseofthemoralhazardproblem,(a)lenderswillwritedebtcontractsthatrestrictcertainactivitiesofborrowers.(b)lenderswillmorereadilylendtoborrowerswithhighnetworth.(c)debtcontractsareusedlessfrequentlytoraisecapitalthanareequitycontracts.(d)alloftheabove.(e)only(a)and(b)oftheabove.Answer:E40.Moralhazardinequitycontractsisknownasthe_________problembecausethemanagerofthefirmhasfewerincentivestomaximizeprofitsthanthestockholdersmightideallyprefer.(a)principal-agent(b)adverseselection(c)free-rider(d)debtdeflationAnswer:A41.Becausemanagers(_________)havelessincentivetomaximizeprofitsthanthestockholders-owners(_________)do,stockholdersfinditcostlytomonitormanagers;thus,stockholdersarereluctanttopurchaseequities.(a)principals;agents(b)principals;principals(c)agents;agents(d)agents;principalsAnswer:D42.Theprincipal-agentproblem(a)occurswhenmanagershavemoreincentivetomaximizeprofitsthanthestockholders-ownersdo.(b)wouldnotariseiftheownersofthefirmhadcompleteinformationabouttheactivitiesofthemanagers.(c)infinancialmarketshelpstoexplainwhyequityisarelativelyimportantsourceoffinanceforAmericanbusiness.(d)alloftheabove.(e)only(a)and(b)oftheabove.Answer:B43.Solutionstothemoralhazardprobleminclude(a)highnetworth.(b)monitoringandenforcementofrestrictivecovenants.(c)greaterrelianceonequitycontractsandlessondebtcontracts.(d)alloftheabove.(e)only(a)and(b)oftheabove.Answer:E44.Onefinancialintermediaryinourfinancialstructurethathelpstoreducethemoralhazardarisingfromtheprincipal-agentproblemisthe(a)venturecapitalfirm.(b)moneymarketmutualfund.(c)pawnbroker.(d)savingsandloanassociation.Answer:A45.Aventurecapitalfirmprotectsitsequityinvestmentfrommoralhazardthroughwhichofthefollowingmeans?(a)Itplacespeopleontheboardofdirectorstobettermonitortheborrowingfirm’sactivities.(b)Itwritescontractsthatprohibitthesaleofanequityinvestmenttoanyonebuttheventurecapitalfirm.(c)Itprohibitstheborrowingfirmfromreplacingitsmanagement.(d)Itdoesboth(a)and(b)oftheabove.(e)Itdoesboth(a)and(c)oftheabove.Answer:D46.Debtcontracts(a)areagreementsbytheborrowerstopaythelendersfixeddollaramountsatperiodicintervals.(b)haveanadvantageoverequitycontractsinthattheyhavealowercostofstateverification.(c)areusedmuchmorefrequentlytoraisecapitalthanareequitycontracts.(d)alloftheabove.(e)only(a)and(b)oftheabove.Answer:D47.EquitycontractsaccountforasmallfractionofexternalfundsraisedbyAmericanbusinessesbecause(a)costlystateverificationmakestheequitycontractlessdesirablethanthedebtcontract.(b)thereisgreaterscopeformoralhazardproblemsunderequitycontracts,ascomparedtodebtcontracts.(c)equitycontractsdonotpermitborrowingfirmstoraiseadditionalfundsbyissuingdebt.(d)alloftheabove.(e)both(a)and(b)oftheabove.Answer:E48.Adebtcontractissaidtobeincentivecompatibleif(a)theborrower’snetworthreducestheprobabilityofmoralhazard.(b)restrictivecovenantslimitthetypeofactivitiesthatcanbeundertakenbytheborrower.(c)both(a)and(b)oftheaboveoccur.(d)neither(a)nor(b)oftheaboveoccur.Answer:A49.Adebtcontractismorelikelytobeincentivecompatibleif(a)thecompanymustfollowstandardaccountingprinciples.(b)thefundsareprovidedbyaventurecapitalfirm.(c)ownersofthefirmhavemoreoftheirownmoneyinthebusiness.(d)alloftheabove.(e)only(b)and(c).Answer:C50.Aclauseinamortgageloancontractrequiringtheborrowertopurchasehomeowner’sinsuranceisanexampleof(a)arestrictivecovenant.(b)acollusiveagreementbetweenmortgagelendersandinsurancecompanies.(c)both(a)and(b)oftheabove.(d)neither(a)and(b)oftheabove.Answer:A51.Adebtcontractthatspecifiesthatthecompanycanonlyusethefundstofinancecertainactivities(a)isaprivateloan.(b)containsarestrictivecovenant.(c)increasestheproblemofadverseselection.(d)alloftheabove.(e)only(a)and(b).Answer:B52.Whichofthefollowingareaccuratestatementsconcerningtherolethatrestrictivecovenantsplayinreducingmoralhazardinfinancialmarkets?(a)Covenantsreducemoralhazardbyrestrictingborrowers’undesirablebehavior.(b)Covenantsrequirethatborrowerskeepcollateralingoodcondition.(c)Covenantsrequireperiodicaccountingstatementsandincomereports.(d)Alloftheabove.(e)Only(a)and(b)oftheabove.Answer:D53.Althoughrestrictivecovenantscanpotentiallyreducemoralhazard,aproblemwithrestrictivecovenantsisthat(a)borrowersmayfindloopholesthatmakethecovenantsineffective.(b)theyarecostlytomonitorandenforce.(c)toomanyresourcesmaybedevotedtomonitoringandenforcingthem,asdebtholdersduplicateothers’monitoringandenforcementefforts.(d)alloftheabove.(e)only(a)and(b)oftheabove.Answer:E54.Governmentsindevelopingcountriessometimesadoptpoliciesthatretardtheefficientoperationoftheirfinancialsystems.Theseactionsincludepoliciesthat(a)preventlendersfromforeclosingonborrowerswithpoliticalclout.(b)nationalizebanksanddirectcredittopolitically-favoredborrowers.(c)makeitcostlytocollectpaymentsandcollateralfromdefaultingdebtors.(d)doalloftheabove.(e)doonly(a)and(b)oftheabove.Answer:D55.Financialcrises(a)aremajordisruptionsinfinancialmarketsthatarecharacterizedbysharpdeclinesinassetpricesandthefailuresofmanyfinancialandnonfinancialfirms.(b)occurwhenadverseselectionandmoralhazardproblemsinfinancialmarketsbecomemoresignificant.(c)frequentlyleadtosharpcontractionsineconomicactivity.(d)alloftheabove.(e)only(a)and(b)oftheabove.Answer:D56.Financialcrises(a)causefailuresoffinancialintermediariesandleaveonlysecuritiesmarketstochannelfundsfromsaverstoborrowers.(b)arearecentphenomenonthatoccursonlyindevelopingcountries.(c)invariablyleadtodebtdeflation.(d)alloftheabove.(e)noneoftheabove.Answer:E57.Factorsthatleadtoworseningconditionsinfinancialmarketsinclude(a)increasesininterestrates.(b)decliningstockprices.(c)increasinguncertaintyinfinancialmarkets.(d)alloftheabove.(e)only(a)and(b)oftheabove.Answer:D58.Factorsthatleadtoworseningconditionsinfinancialmarketsinclude(a)declininginterestrates.(b)unanticipatedincreasesinthepricelevel.(c)bankpanics.(d)only(a)and(c)oftheabove.(e)only(b)and(c)oftheabove.Answer:C59.Iftheanatomyofafinancialcrisisisthoughtofasasequenceofevents,whichofthefollowingeventswouldbeleastlikelytobetheinitiatingcauseofthefinancialcrisis?(a)Increaseininterestrates(b)Bankpanic(c)Stockmarketdecline(d)IncreaseinuncertaintyAnswer:B60.AnexaminationofpastfinancialcrisesintheUnitedStatesindicatesthatabankpanichastypicallybeen(a)theonekeyfactorthatinitiatesafinancialcrisis.(b)aconsequenceofworseningconditionsduringafinancialcrisis.(c)theresultofdeclininginterestratesthatraisedadverseselectionproblems.(d)aneventthatisunrelatedtofinancialcrises.Answer:B61.MostfinancialcrisesintheUnitedStateshavebegunwith(a)asteepstockmarketdecline.(b)anincreaseinuncertaintyresultingfromthefailureofamajorfirm.(c)asteepdeclineininterestrates.(d)alloftheabove.(e)only(a)and(b)oftheabove.Answer:E62.MostfinancialcrisesintheUnitedStateshavebegunwith(a)asharpriseininterestrates.(b)asteepstockmarketdecline.(c)anincreaseinuncertaintyresultingfromthefailureofamajorfirm.(d)alloftheabove.(e)only(a)and(b)oftheabove.Answer:D63.Inadditiontohavingadirecteffectonincreasingadverseselectionproblems,increasesininterestratesalsopromotefinancialcrisesby_________firms’andhouseholds’interestpayments,thereby_________theircashflow.(a)increasing;increasing(b)increasing;decreasing(c)decreasing;increasing(d)decreasing;decreasingAnswer:B64.Deteriorationinafirm’sbalancesheetandadeclineinnetworth,whichincreasesadverseselectionandmoralhazardproblems,canbecausedby(a)asharpdropinthepricelevel.(b)asharpincreaseinuncertainty.(c)asharpdepreciationofthedomesticcurrency.(d)alloftheabove.(e)only(a)and(c).Answer:E65.AdverseselectionandmoralhazardproblemsincreasedinmagnitudeduringtheearlyyearsoftheGreatDepressionas(a)stockpricesdeclinedto10percentoftheirlevelin1929.(b)banksfailed.(c)theaggregatepriceleveldeclined.(d)aresultofalloftheabove.(e)aresultof(a)and(b)oftheabove.Answer:D66.AdverseselectionandmoralhazardproblemsincreasedinmagnitudeduringtheearlyyearsoftheGreatDepressionas(a)stockpricesdeclinedto10percentoftheirlevelin1929.(b)banksfailed.(c)theaggregatepricelevelrose.(d)aresult