Foundations of Financial Markets and Institutions, 4e (Fabozzi/Modigliani/Jones)
Chapter 2 Financial Institutions, Financial Intermediaries, and Asset Management Firms

Multiple Choice Questions

1 Financial Institutions

1) Financial enterprises, more popularly referred to as financial institutions, provide a variety of services. Which of the below is NOT one of these?
A) Transform financial assets acquired through the market and constituting them into a different, and more widely preferable, type of asset–which becomes their liability.
B) Exchange financial assets on behalf of customers but not for their own accounts.
C) Manage the portfolios of other market participants.
D) Assist in the creation of financial assets for their customers, and then sell those financial assets to other market participants.
Answer: B
Comment: Financial enterprises exchange financial assets both on behalf of customers and for their own accounts.
Diff: 2
Topic: 2.1 Financial Institutions
Objective: 2.1 the business of financial institutions

2) Financial intermediaries include ________ that acquire the bulk of their funds by offering their liabilities to the public mostly in the form of deposits; insurance companies, pension funds, and finance companies.
A) depository institutions
B) utilities
C) initial public offerings
D) preferred equity instrument.
Answer: A
Diff: 1
Topic: 2.1 Financial Institutions
Objective: 2.1 the business of financial institutions

3) Some nonfinancial enterprises have subsidiaries that provide financial services. These financial institutions are called ________.
A) free finance companies.
B) captive finance companies.
C) captive investment companies.
D) captive finance shares.
Answer: B
Comment: Some nonfinancial enterprises have subsidiaries that provide financial services. For example, many large manufacturing