Test Bank For Financial Institutions Management 5th Canadian Edition By Marcia Cornett

Chapter 1

1. Financial institutions act as intermediaries between suppliers and demanders of money.
   True    False

2. If a household invests in corporate securities and does not supervise how the funds are invested or used by the corporation, the risk of not earning the desired return or not having the funds returned increase.
   True    False

3. If not done by FIs, the process of monitoring the actions of borrowers would reduce the attractiveness and increase the risk of investing in corporate debt and equity by individuals.
   True    False

4. Failure to monitor the actions of firms in a timely and complete fashion after purchasing securities in that firm exposes the investor to agency costs.
   True    False

5. The risk that the sale price of an asset will be less than the purchase price of an asset is called liquidity risk.
   True    False