Financial Institutions: An Overview for Finance BSc Students

Question 1

What is the main purpose of an insurance company?

Accepted Answer

To provide protection against risks and financial uncertainties.

Answer

To provide loans and mortgages to individuals and businesses.

Answer

To offer investment and financial advice to clients.

Answer

To provide financial assistance to retirees and pensioners.

Question 2

What is the main purpose of pension funds?

Accepted Answer

Providing investment opportunities for retirement savings

Answer

Insuring individuals against financial losses

Answer

Providing financial services to businesses

Answer

Managing financial risks for institutions

Question 3

What is the primary source of funding for banks?

Accepted Answer

Customer deposits

Answer

Issuance of bonds

Answer

Government subsidies

Answer

Venture capital investments

Question 4

What is the main purpose of a pension fund?

Accepted Answer

To invest and manage retirement savings

Answer

To provide life and health insurance coverage for individuals

Answer

To facilitate financial transactions between businesses

Answer

To hedge against financial risks

Question 5

What is the primary role of the Financial Conduct Authority (FCA) in the UK financial system?

Accepted Answer

To regulate financial institutions and protect consumers

Answer

To set interest rates and manage monetary policy

Answer

To provide general financial advice to individuals and businesses

Answer

To manage national pension funds and insurance policies

Question 6

What is the primary difference between a primary market and a secondary market?

Accepted Answer

Primary markets issue new securities, while secondary markets trade existing securities

Answer

Secondary markets issue new securities, while primary markets trade existing securities

Answer

Primary markets trade existing securities, while secondary markets issue new securities

Answer

There is no fundamental difference between primary and secondary markets.

Question 7

Which type of financial institution specializes in underwriting and issuing new securities?

Accepted Answer

Investment bank

Answer

Commercial bank

Answer

Pension fund

Answer

Insurance company

Question 8

Which of the following is a distinguishing characteristic of pension funds?

Accepted Answer

Providing retirement benefits to members

Answer

Investing in a diversified portfolio of assets

Answer

Managing risk primarily through derivatives

Answer

Issuing equity securities

Question 9

What is the term for the process of developing new financial products and services?

Accepted Answer

Innovation

Answer

Regulation

Answer

Investment

Answer

Diversification

Question 10

Which of the following is **not** a primary function of financial institutions?

Accepted Answer

Produce goods and services

Answer

Mobilize savings for investment

Answer

Facilitate financial transactions

Answer

Manage risk

Question 11

Commercial banks primarily serve which type of customers?

Accepted Answer

Individuals and businesses

Answer

Insurance companies

Answer

Government entities

Question 12

Which of the following is a **key** benefit of financial institutions?

Accepted Answer

Reduced transaction costs

Answer

Increased inflation

Answer

Limited access to capital

Question 13

What is the fundamental purpose of financial regulation?

Accepted Answer

To protect consumers and ensure stability

Answer

To promote economic growth

Answer

To reduce government spending

Answer

To control inflation

Question 14

What is the primary role of the central bank within the financial system?

Accepted Answer

To regulate the money supply and set interest rates

Answer

To manage government investments

Answer

To provide loans to individuals

Question 15

What is the primary purpose of a mutual fund?

Accepted Answer

To pool investor funds and invest in a diversified portfolio

Answer

To provide loans to businesses

Answer

To underwrite insurance policies

Question 16

Which of the following is **not** a type of financial derivative?

Accepted Answer

Stock

Answer

Swap

Answer

Option

Answer

Future