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Financial Institutions Management – A Risk Management Approach 7th, Anthonay Saunders Test Bank

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Test Bank for Financial Institutions Management: A Risk Management Approach, 7th Edition, Anthonay Saunders and Marcia M Cornett. Note : this is not a text book. Description: ISBN-13: 978-0073530758 ISBN-10: 0073530751.

 

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Test Bank for Financial Institutions Management – A Risk Management Approach 7th

Chapter 1:

1. During the 1930s, economic collapse the banking system in the U.S. performed directly or indirectly all financial services. Those functions included all of the following EXCEPT
A. commercial banking.
B. money market funds.
C. investment banking.
D. stock investing.
E. insurance services.

2. Depository financial institutions include all of the following EXCEPT A. commercial banks.
B. savings banks.
C. investment banks.
D. credit unions.
E. all of the above are depository institutions.

3. Nondepository financial institutions are represented by all of the following EXCEPT
A. insurance companies.
B. mutual funds.
C. finance companies.
D. credit unions.
E. securities firms.

4. Which of the following statements is FALSE?
A. A financial intermediary specializes in the production of information.
B. A financial intermediary reduces its risk exposure by pooling its assets.
C. A financial intermediary benefits society by providing a mechanism for payments.
D. A financial intermediary may act as a broker to bring together funds deficit and funds surplus units.
E. A financial intermediary acts as a lender of last resort.

5. Which function of an FI reduces transaction and information costs between a corporation and individual which may encourage a higher rate of savings?
A. Brokerage services.
B. Asset transformation services.
C. Information production services.
D. Money supply management.
E. Administration of the payments mechanism.

6. In its role as a delegated monitor, an FI
A. keeps track of required interest and principal payments on loans it originates.
B. works with financially distressed borrowers in danger of defaulting on their loans.
C. holds portfolios of loans that they continue to service.
D. maintains contact with borrowers to ensure that loan proceeds are utilized for intended purposes.
E. All of the above.

7. Which of the following is NOT a major function of financial intermediaries?
A. Brokerage services.
B. Asset transformation services.
C. Information production.
D. Management of the nation’s money supply.
E. Administration of the payments mechanism.

8. Advantages of depositing funds into a typical bank account instead of directly buying corporate securities include all of the following EXCEPT
A. monitoring done by the bank on your behalf.
B. increased liquidity if funds are needed quickly.
C. increased transactions costs.
D. less price risk when funds are needed.
E. better diversification of deposited funds.

9. Many households place funds with financial institutions because many FI accounts provide
A. lower denominations than other securities.
B. flexible maturities verses other interest-earning securities.
C. better liquidity than directly negotiated debt contracts.
D. less price risk if interest rates change.
E. All of the above.

10. The reason FIs can offer highly liquid, low price-risk contracts to savers while investing in relatively illiquid and higher risk assets is
A. because diversification allows an FI to predict more accurately the expected returns on its asset portfolio.
B. significant amounts of portfolio risk are diversified away by investing in assets that have correlations between returns that are less than perfectly positive.
C. because individual savers cannot benefit from risk diversification.
D. because FIs have a cost advantage in monitoring their portfolios.
E. All of the above.

Chapter 2:
1. Which of the following FIs does not currently provide a payment function for their customers?
A. Depository institutions.
B. Insurance companies.
C. Finance companies.
D. Pension funds.
E. Mutual funds.

2. A consumer lending function is performed by each of the following FIs EXCEPT
A. mutual funds.
B. finance companies.
C. pension funds.
D. depository institutions.
E. insurance companies.

3. Which of the following FIs does not provide a business lending function?
A. Depository institutions.
B. Insurance companies.
C. Finance companies.
D. Pension funds.
E. Mutual funds.

4. As of 2009, commercial banks with over $10 billion in assets constituted approximately percent of the industry assets and numbered approximately .
A. 50; 310
B. 60; 165
C. 70; 525
D. 80; 85
E. 90; 440

5. The largest asset class on U.S. commercial banks’ balance sheet as of year-end 2009 was
A. investment securities.
B. commercial and industrial loans.
C. real estate loans.
D. cash.
E. deposits.

6. The largest liability on U.S. commercial banks’ balance sheet as of year-end 2009 was
A. investment securities.
B. non-ransaction accounts.
C. transaction accounts.
D. borrowings.
E. cash.

7. By late 2009, the number of commercial banks in the U.S. was approximately
A. 2,200.
B. 4,680.
C. 6,900.
D. 8,100.
E. 12,700.

9. By late 2009, the number of branches of existing commercial banks in the U.S. approximated , which was a (an) from 1985.
A. 88,000; increase
B. 43,000; increase
C. 68,000; decrease
D. 103,000; decrease
E. 72,000; increase

10. The largest asset class on FDIC-insured savings institutions’ balance sheet as of year-end 2009 was
A. mortgage loans.
B. cash.
C. investment securities.
D. deposits.
E. non-mortgage Loans.

Chapter 3:

1. The primary function of insurance companies is to
A. generate fees for the banks that sell insurance products.
B. sell a variety of consumer investment products.
C. protect policyholders from adverse events.
D. assist in the transfer of wealth into the future.
E. provide contracts that encourage policyholders to save current income.

2. The largest line of life insurance in terms of total contract value in the U.S. is
A. ordinary life.
B. group life.
C. industrial life.
D. credit life.
E. noncontributory life.

3. The problem of adverse selection
A. implies that many people who do not need insurance coverage have it through group plans.
B. means that those people who apply for insurance are the least likely to need insurance coverage.
C.causes insurance underwriters to alter the health statistics of the general population when determining
appropriate premiums.
D. creates a savings element along with the insurance component of the premium and policy.
E. does not exist in the insurance industry.

4. Insurance policy benefits are classified on an insurance company’s balance sheet as
A. liabilities, because the insurance company may have to pay out the benefits.
B. assets, because policy benefits are valuable to the company.
C. liabilities, because customers may fall behind on their premium payments.
D. assets, because policy benefits are fully covered by premium payments.
E. liabilities, because insurance companies must maintain a capital base to cover the payments of benefits.

5. Which of the following is pure life insurance with a savings element built in
A. term life.
B. universal life.
C. whole life.
D. variable universal life.
E. variable life.

6. An insurance policy that protects an individual over an entire lifetime is called
A. term life.
B. universal life.
C. whole life.
D. endowment life.
E. variable life.

7. An insurance policy in which fixed premium payments are invested in mutual funds of stocks, bonds, and money market instruments is called
A. term life.
B. universal life.
C. whole life.
D. endowment life.
E. variable life.

8. Which of the following involves fixed premium payments and a benefit payout at the time of death that will depend on investment returns over the life of the policy?
A. Term life.
B. Variable life.
C. Whole life.
D. Endowment life.
E. Universal life.

9. An insurance policy that often is the least expensive to the insured because of the policy does not include a savings plan is called
A. term life.
B. universal life.
C. whole life.
D. endowment life.
E. variable life.

10. An insurance policy that allows both the premium amount and the maturity of the life contract to be changed by the insured is called
A. term life.
B. universal life.
C. whole life.
D. endowment life.
E. variable life.

Chapter 4:

1. By mid-year 2009, there were approximately securities firms and investment banks operating.
A. 9,100
B. 7,600
C. 5,200
D. 4,800
E. 2,200

2. The most common benchmark of relative size of a firm in the securities trading and underwriting industry is based on
A. total asset value.
B. total equity.
C. total debt.
D. annual sales.
E. annual profits.

3. Which of the following differentiates securities firms from investment banks?
A. Securities firms are concerned with the commercial side of the business while investment banks are concerned with the retail side of the business.
B. Securities firms assist in trading of existing securities while investment banks specialize in underwriting new securities.
C. Securities firms underwrite new issues of securities while investment banks provide brokerage services.
D. Securities firms originate new issues of securities and investment banks underwrite the securities.
E. Securities firms are concerned with private placements of securities whereas investment banks are concerned with publicly traded securities.

4. Which of the following would be a key area of activity for an investment bank specializing in the commercial side of the business?
A. Purchase of existing securities.
B. Sale of securities in the secondary market.
C. Brokerage of existing securities.
D. Underwriting issues of new securities.
E. All of the above.

5. Which of the following is true?
A. Investment bankers earn fees based on the success of their placements when they underwrite using a best-efforts basis.
B. Investment bankers earn fees based on the success of their placement when they underwrite using firm- commitment basis.
C With best-efforts underwriting, investment bankers act as principals where they purchase the securities from the issuer and sell them at a higher price.
D. Answers A and B only.
E. Answers B and C only.

6. Discount brokers
A. are securities firms focused on providing research support for customers.
B. conduct trades for customers but do not offer investment advice.
C. allow customers to receive investment advice at very low rates.
D. effect trades for customers on- or offline while offering investment advice.
E. are electronic trading securities firms that allow customers to trade without the use of a broker.

7. Which of the following is most typical of broker-dealers?
A. They assist in underwriting of new securities.
B. They assist in trading of existing securities.
C. They assist in issuing new securities.
D. They assist in underwriting and distribution of new securities.
E. All of the above.

8. Which of the following is true of private placements?
A. Securities are placed with few large institutional investors.
B. Securities of private firms are sold to the investing public at lower prices.
C. They must be registered with the SEC.
D. Public trading in these securities is not allowed.
E.Subject to more stringent disclosure and informational requirements than those imposed by the SEC on publicly registered issues.

9. In market-making
A. agency transactions are two-way transactions on behalf of customers, such as a dealer working for a fee or commission.
B. agency transactions are when market makers take long or short positions and seek profits on price movements.
C. market makers take inventory positions to stabilize the market in the securities.
D. Answers A and C only.
E. Answers B and C only.

10. In market-making
A. principal transactions are two-way transactions on behalf of customers, such as a dealer working for a fee or commission.
B. principal transactions are when market makers take long or short positions and seek profits on price movements.
C. market makers take inventory positions to stabilize the market in the securities.
D. Answers A and C only.
E. Answers B and C only.

Chapter 5:

1. The number of funds and assets size of the mutual fund industry have grown dramatically since 1970 because of the introduction of
A. money market mutual funds in 1972.
B. tax-exempt money market mutual funds in 1979.
C. special-purpose equity, bond, and derivative funds.
D. 401-k retirement plans sponsored by employers.
E. All of the above.

2. The long-term mutual fund sector includes
A. money market mutual funds.
B. equity funds.
C. bond funds.
D. Answers B and C only.
E. All of the above.

3. The short-term mutual fund sector includes
A. money market mutual funds.
B. hybrid funds.
C. equity funds.
D. bond funds.
E. tax-exempt municipal bond funds.

4. Open-end mutual funds guarantee
A. investors a minimum rate of return.
B. investors a minimum Net Asset Value (NAV).
C. to redeem investors’ shares upon demand at the daily Net Asset Value (NAV).
D. to earn the rate of return promised in the prospectus.
E. that there will be no load charges.

5. As compared to purchasing an individual stock, a no-load mutual fund investor will usually get
A. commissionless reinvestment opportunities.
B. better diversification.
C. no-cost switching between funds within the same fund family.
D. lower commission costs.
E. All of the above

6. Regarding the relative asset size and asset growth rate of mutual fund sectors,
A. long-term funds had more assets at the end of 2009, but short-term funds had grown at a faster rate since 1980.
B. long-term funds had more assets at the end of 2009, and long-term funds had grown at a faster rate since 1980.
C. short-term funds had more assets at the end of 2009, but long-term funds had grown at a faster rate since 1980.
D. short-term funds had more assets at the end of 2009, and short-term funds had grown at a faster rate since 1980.
E. More than one of the above is correct.

7. Which of the following is one of the characteristics of household mutual fund owners as of 2009?
A. The typical fund-owning household has $100,000 invested.
B. 53 percent of the families are headed by someone without a college degree.
C. The median age of mutual fund holders is 50.
D. 23 percent of investors that conducted equity fund transactions used the Internet.
E. All of the above.

8. The returns obtained by investors of mutual funds include the following except
A. interest income earned on assets.
B. dividend income earned on assets.
C. capital gains on assets sold by the fund.
D. capital appreciation in the underlying value of the assets held in the portfolio.
E. tax benefits from tax-exempt status of mutual funds.

9. Closed-end investment companies
A. have a fixed number of shares.
B. can trade at a price that is greater than, equal to, or less than the NAV.
C. will trade at a different price as the number of shares of the fund changes.
D. A and C only.
E. A and B only.

10. Open-end mutual funds
A. require that NAV consider the amount of discount or premium in the share value.
B. calculate the NAV based on the total value of assets held divided by the number of fund shares outstanding.
C. may experience fluctuations in the number of shares outstanding on a daily basis.
D. All of the above.
E. Answers B and C only.

Chapter 6:

1. What is the primary function of finance companies?
A. Protect individuals and corporations from adverse events.
B. Make loans to both individuals and corporations.
C. Extend loans to banks and other financial institutions.
D. Pool the financial resources of individuals and companies and invest in diversified portfolios of assets.
E. Assist in the trading of securities in the secondary markets.

2. Finance companies have enjoyed very high rates of growth because they
A. are willing to lend to riskier customers than commercial banks.
B. charge higher rates on lower risk loans.
C. do not have ties or affiliations with manufacturing firms.
D. face very high levels of regulation, which assures their success.
E. do not sell the loans that they originate.

3. Which of the following is NOT true?
A. The finance company industry tends to be very concentrated.
B. Twenty of the largest finance companies account for more than 65% of the industry assets.
C. Many of the largest finance companies tend to be wholly owned or are captive subsidiaries of major manufacturing firms.
D. Finance companies specialize only in consumer loans and do not make business loans.
E. Finance companies often provide captive financing for the purchase of products manufactured by their parent company.

4. Which of the following is NOT a type of finance company?
A. Sales finance institutions.
B. Personal credit institutions.
C. Business credit institutions.
D. Captive finance company.
E. All of the above are types of finance companies.

5. A company that specializes in making installment loans to consumers would best be categorized as a
A. sales finance institution.
B. personal credit institution.
C. business credit institution.
D. lease finance company.
E. factoring company.

6. This type of finance company competes directly with depository institutions for consumer loans because they can frequently process loans faster and more conveniently.
A. Sales finance institution.
B. Personal credit institution.
C. Business credit institution.
D. Lease finance company.
E. Factoring company.

7. A company that specializes in making loans to the customers of a particular retailer or manufacturer would best be categorized as a
A. sales finance institution.
B. personal credit institution.
C. business credit institution.
D. lease finance company.
E. factoring company.

8. Factoring involves
A. making loans to customers that depository institutions find too risky to lend.
B. providing financing for the purchase of products manufactured by the parent company.
C. accepting collateral that depository institutions do not find acceptable.
D. providing financing through equipment leasing.
E. purchasing of accounts receivable by finance company from corporate customers.

9. Which of the following is NOT true?
A. The fastest growing area of finance companies in recent years has been in the area of leasing and business loans.
B. Business loans represent the largest portion of the loan portfolio of finance companies.
C. Finance companies rely on short-term commercial paper and customer deposits to finance their assets.
D. Finance companies rely on short-term commercial paper and long-term debt to finance their assets.
E. Finance companies are now the largest issuers of commercial paper in the U.S.

10. Finance companies charge different rates than do commercial banks which
A. tend to be higher than bank rates.
B. often reflect a more risky borrower.
C. causes some finance companies to be classified as subprime lenders.
D. must meet state usury law guidelines.
E. All of the above.

Chapter 7:

1. Holding corporate bonds with fixed interest rates involves
A. default risk only.
B. interest rate risk only.
C. liquidity risk and interest rate risk only.
D. default risk and interest rate risk.
E. default and liquidity risk only.

2. Regulation limits FI investment in non-investment grade bonds (rated below Baa or non-rated).What kind of risk is this designed to limit?
A. Liquidity risk.
B. Interest rate risk.
C. Credit risk.
D. Foreign exchange rate risk.
E. Off-balance sheet risk.

3. What type of risk focuses upon mismatched asset and liability maturities and durations?
A. Liquidity risk.
B. Interest rate risk.
C. Credit risk.
D. Foreign exchange rate risk.
E. Off-balance sheet risk.

4. The asset transformation function potentially exposes the FI to
A. foreign exchange risk. B. technology risk
C. operational risk
D. trading risk
E. interest rate risk.

5. Which function of an FI involves buying primary securities and issuing secondary securities?
A. Brokerage.
B. Asset transformation.
C. Investment research. D. Self-regulator.
E. Trading.

6. What type of risk focuses upon mismatched currency positions?
A. Liquidity risk.
B. Interest rate risk. C. Credit risk.
D. Foreign exchange rate risk.
E. Off-balance sheet risk.

7. What type of risk focuses upon future contingencies?
A. Liquidity risk.
B. Interest rate risk.
C. Credit risk.
D. Foreign exchange rate risk.
E. Off-balance sheet risk.

8. If the loans in the bank’s portfolio are all negatively correlated, what will be the impact on the bank’s credit risk exposure?
A. The loans’ negative correlations will decrease the bank’s credit risk exposure because lower than expected returns on some loans will be offset by higher than expected returns on other loans.
B. The loans’ negative correlations will increase the bank’s credit risk exposure because lower than expected returns on some loans will be offset by higher than expected returns on other loans.
C . The loans’ negative correlations will increase the bank’s credit risk exposure because higher returns on less risky loans will be offset by lower returns on riskier loans.
D. The loans’ negative correlations will decrease the bank’s credit risk exposure because higher returns on less risky loans will be offset by lower returns on riskier loans.
E. There is no impact on the bank’s credit risk exposure.

9. A mortgage loan officer is found to have provided false documentation that resulted in a lower interest rate on a loan approved for one of her friends. The loan was subsequently added to a loan pool, securitized and sold. Which of the following risks applies to the false documentation by the employee?
A. Market risk.
B. Credit risk.
C. Operational risk.
D. Technological risk.
E. Sovereign risk.

10. A small local bank failed because a housing market collapse following the departure of the areas largest employer. What type of risk applies to the failure of the institution?
A. Firm-specific risk.
B. Technological risk.
C. Operational risk.
D. Sovereign risk.
E. Insolvency risk.

Chapter 8:

1. The net worth of a bank is the difference between the
A. value of retained earnings and the provision for loan losses.
B. market value of assets and the market value of liabilities.
C. book value of assets and book value of liabilities.
D. rate-sensitive assets and rate-sensitive liabilities.
E. None of the above.

2. Because of its simplicity, smaller depository institutions still use this model as their primary measure of interest rate risk.
A. The repricing model.
B. The maturity model.
C. The duration model.
D. The convexity model.
E. The option pricing model.

3. The repricing gap approach calculates the gaps in each maturity bucket by subtracting the
A. current assets from the current liabilities.
B. long term liabilities from the fixed assets.
C. rate sensitive assets from the total assets.
D. rate sensitive liabilities from the rate sensitive assets.
E. current liabilities from tangible assets.

4. Which of the following observations about the repricing model is correct?
A. Its information value is limited.
B. It accounts for the problem of rate-insensitive asset and liability runoffs and prepayments.
C. It accommodates cash flows from offbalance-sheet activities.
D. It points out an FI’s profit exposure to interest rate changes.
E. It considers market value effects of interest rate changes.

5. When repricing all interest sensitive assets and all interest sensitive liabilities in a balance sheet, the cumulative gap will be
A. zero.
B. one.
C. greater than one.
D. a negative value.
E. infinity.

6. The repricing gap does not accurately measure FI interest rate risk exposure because
A. FIs cannot accurately predict the magnitude change in future interest rates.
B. FIs cannot accurately predict the direction of change in future interest rates.
C. accounting systems are not accurate enough to allow the calculation of precise gap measures.
D. it does not recognize timing differences in cash flows within the same maturity grouping.
E. equity is omitted.

7. An FI’s net interest income reflects
A. its asset-liability structure.
B. market rates of interest.
C. the riskiness of its loans and investments.
D. the cost of its deposit and non-deposit sources of funds.
E. All of the above.

8. A positive gap implies that an increase in interest rates will cause in net interest income.
A. no change
B. a decrease
C. an increase
D. an unpredictable change
E. Either A or B.

9. If interest rates decrease 50 basis points for an FI that has a gap of +$5 million, the expected change in net interest income is
A. + $2,500.
B. + $25,000.
C. + $250,000.
D. – $250,000.
E. – $25,000.

10. If interest rates increase 75 basis points for an FI that has a gap of -$15 million, the expected change in net interest income is
A. -$112,500.
B. +$112,500.
C. +$1,125,0000.
D. -$250,000
E. -$150,000.

Chapter 9:
1. Which of the following is indicated by high numerical value of the duration of an asset?
A. Low sensitivity of an asset price to interest rate shocks.
B. High interest inelasticity of a bond.
C. High sensitivity of an asset price to interest rate shocks.
D. Lack of sensitivity of an asset price to interest rate shocks.
E. Smaller capital loss for a given change in interest rates.

2. For small change in interest rates, market prices of bonds move in an inversely proportional manner according to the size of the
A. equity.
B. asset value.
C. liability value.
D. duration value.
E. Answers A and B only.

3. Which of the following statements about leverage adjusted duration gap is true?
A. It is equal to the duration of the assets minus the duration of the liabilities.
B. Larger the gap in absolute terms, the more exposed the FI is to interest rate shocks.
C. It reflects the degree of maturity mismatch in an FI’s balance sheet.
D. It indicates the dollar size of the potential net worth. E. Its value is equal to duration divided by (1+R).

4. The larger the size of an FI, the larger the from any given interest rate shock.
A. duration mismatch
B. immunization effect
C. net worth exposure
D. net interest income
E. risk of bankruptcy

5. The duration of all floating rate debt instruments is
A. equal to the time to maturity.
B. less than the time to repricing of the instrument.
C. time interval between the purchase of the security and its sale.
D. equal to time to repricing of the instrument.
E. infinity.

6. Managers can achieve the results of duration matching by using these to hedge interest rate risk.
A. Rate sensitive assets.
B. Rate sensitive liabilities.
C. Coupon bonds.
D. Consol bonds.
E. Derivatives.

7. Immunizing the balance sheet to protect equity holders from the effects of interest rate risk occurs when
A. the maturity gap is zero.
B. the repricing gap is zero.
C. the duration gap is zero.
D. the effect of a change in the level of interest rates on the value of the assets of the FI is exactly offset by the effect of the same change in interest rates on the liabilities of the FI.
E. after-the-fact analysis demonstrates that immunization coincidentally occurred.

8. The duration of a consol bond is
A. less than its maturity.
B. infinity.
C. 30 years.
D. more than its maturity.
E. given by the formula D=1/1-R.

9. Immunization of a portfolio implies that changes in will not affect the value of the portfolio.
A. book value of assets
B. maturity
C. market prices
D. interest rates
E. duration

10. When does “duration” become a less accurate predictor of expected change in security prices?
A. As interest rate shocks increase in size.
B. As interest rate shocks decrease in size.
C. When maturity distributions of an FI’s assets and liabilities are considered.
D. As inflation decreases.
E. When the leverage adjustment is incorporated.

Chapter 10:

1. The root cause of much of the losses of FIs during the financial crisis of 2008-2009 was
A. interest rate risk.
B. market risk.
C. sovereign risk.
D. firm-specific risk.
E. systematic risk.

2. Conceptually, an FI’s trading portfolio can be differentiated from its investment portfolio by
A. liquidity.
B. time horizon.
C. size of assets.
D. interest rate fluctuations.
E. Answers A and B only.

3. Regulators usually view tradable assets as those held for horizons of
A. less than one year.
B. greater than one year.
C. less than a quarter.
D. less than a week.
E. less than three years.

4. Which term defines the risk related to the uncertainty of an FI’s earnings on its trading portfolio caused by changes, and particularly extreme changes in market conditions?
A. Interest rate risk.
B. Credit risk.
C. Sovereign risk.
D. Market risk.
E. Default risk.

5. The portfolio of a bank that contains assets and liabilities that are relatively illiquid and held for longer holding periods
A. is the trading portfolio.
B. is the investment portfolio.
C. contains only long term derivatives.
D. is subject to regulatory risk.
E. cannot be differentiated on the basis of time horizon and liquidity.

6. How can market risk be defined in absolute terms?
A. A dollar exposure amount or as a relative amount against some benchmark.
B. The gap between promised cash flows from loans and securities and realized cash flows.
C. The change in value of an FI’s assets and liabilities denominated in nondomestic currencies.
D. The cost incurred by an FI when its technological investments do not produce anticipated cost savings.
E. The capital required to offset a sudden decline in the value of its assets.

7. Which benefit of market risk measurement (MRM) provides senior management with information on the risk exposure taken by FI traders?
A. Regulation.
B. Resource allocation.
C. Management information.
D. Setting limits.
E. Performance evaluation.

8. Market risk measurement considers the return-risk ratio of traders, which may allow a more rational compensation system to be put in place. Thus MRM aids in
A. regulation.
B. resource allocation.
C. management information.
D. setting limits.
E. performance evaluation.

9. Using the MRM to identify the potential return per unit of risk in different areas by comparing returns to market risk in areas of trading so more capital and resources can be directed to these areas is considered to be which of the following?
A. Regulation.
B. Resource allocation.
C. Management information.
D. Setting limits.
E. Performance evaluation.

10. A reason for the use of MRM for the purpose of identifying potential misallocations of resources caused by prudential regulation is which of the following?
A. Regulation.
B. Resource allocation.
C. Management information.
D. Setting limits.
E. Performance evaluation.

AND MUCH MORE