The problem of using borrowed funds for more risky purpose

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Reference no: EM132276742

1. The problem of using borrowed funds for a more risky purpose than what they were originally intended for is called which of the following ?

moral hazard

default risk

asymmetrical information

2. The multiple by which total deposits can increase for every dollar increase in reserves is the ___________.

required reserve ratio

money multiplier

deposit insurance limit

3. What do an insurance company and a commercial bank have in common?

Both provide the public with a wide range of financial services.

All of the options are correct.

Both link net borrowers with net lenders.

4. Solve the problem A positive NPV means that the investment will provide added value because the projected return exceeds the ________.

modified internal rate of return

adjusted present value

discount rate

accounting rate of return

5. One advantage of using money-purchase plans is that:

They tend to favor older employees.

Forfeitures must be used to reduce future employer contributions.

Employees have more assurance that a contribution will be made on a consistent basis.

Employer contributions are flexible and can be omitted in bad years.

Reference no: EM132276742

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