Which of the following statements is NOT true? A. Debt contracts tend to impose more restrictions on the actions of the borrower than the lender B. Larger corporations have easier access to the securities market C. The financial sector is one of the least regulated industries in the US economy D. Collateral is used to secure debt contracts

Which of the following statements is NOT true? A. Debt contracts tend to impose more restrictions on the actions of the borrower than the lender B. Larger corporations have easier access to the securities market C. The financial sector is one of the least regulated industries in the US economy D. Collateral is used to secure debt contracts

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 11QTD

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Which of the following statements regarding the private debt market is FALSE? A) Private debt has the advantage that it avoids the cost of registration. B) Bank loans are an example of private debt—debt that is not publicly traded. C) Private debt has the disadvantage of being illiquid. D) The public debt market is larger than the private debt market.
Which of the following is a reason for financial regulation? a. To ensure market dominance by strong financial institutions. b. The failure of any financial institution may have a serious negative impact on individuals and economies. c. Banks cannot be trusted. d. To ensure government control of the economy.
Identify the following as either an advantage or a disadvantage of bond financing for a company. a. Bonds do not affect owner control. b. A company earns a lower return with borrowed funds than it pays in interest. c. A company earns a higher return with borrowed funds than it pays in interest. d. Bonds require payment of periodic interest. e. Interest on bonds is tax deductible. f. Bonds require payment of par value at maturity.
Securitisation of loans results in banks: 1. Transferring the credit risk of loans from their balance sheet to other financial institutions. II. Reducing due diligence in the loan appraisal process. III. Increasing the monitoring of these loans. IV. Freeing up capital so that they can bypass capital requirements. O Only II is true. O I, II and IV are true. O Only I and II are true. O Only I is true. O Only III is true.
A bank that grants loans to firms in a many different lines of business: will increase its information cost and decrease its credit risk will increase both its information cost and its credit risk will decrease its information cost and decerase its credit risk will decrease its information costs and increase its credit risk
Financial Institutions have Off-Balance-Sheet acitivities mainly (Commitment Loans; Letter of Credits; Loans slold, and Derivative contracts). What are the potential advantages and risks exposed of these activities?
24. Financial institutions that cut back on their lending are engaged in A) liability management B) deleveraging C) financial innovation. D) torsion control 25. Instruments which provide payments to holders of bonds in the event of default are known as A) collateralized bond obligations B) tertiary payment devices C) credit default swaps D) mortgage-backed securities
2. If a bank wants to avoid volatility in its regulatory capital, which investment classification would be the most desirable, and which investment classification would be the least desirable? Does your answer differ depending on whether the bank is large or small? In other words, do large and small banks differ on how they can categorize unrealized gains/losses on AFS debt?
When any central bank wanted to increase the money supply and loosen credit conditions, what would it do in the private market for government bonds? Explain how this is supposed to affect the economy.
Which of the following statements is INCORRECT ? Large investment banks finance most of their activities by using retail consumer deposits as the primary source of funds. Failure to monitor the actions of firms in a timely and complete fashion after purchasing securities in the firms exposes investors to agency costs. As a delegated monitor, a financial institution's actions reduce agency costs. Financial institutions provide economies of scale in transaction costs
Explain how the bond market facilitate government (fiscal) policies. How do you think the bond market could discipline a government & discourage the government from borrowing (& spending) excessively?
Commercial banks are often restricted by Central banks to hold sufficient capital. Why is such a restriction given?

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A.	Debt contracts tend to impose more restrictions on the actions of the borrower than the lender
	B.	Larger corporations have easier access to the securities market
	C.	The financial sector is one of the least regulated industries in the US economy
	D.	Collateral is used to secure debt contracts