A Bank Is a Financial Intermediary

question 5

Multiple Choice

A bank is a financial intermediary. Which of the following statements is most accurate?

• A) The bank's depositors are the ultimate lenders and the bank is the ultimate borrower.
• B) People seeking loans from the bank are the ultimate spenders while the bank is the ultimate lender.
• C) The bank's depositors are the ultimate lenders, while those seeking loans from the bank are the ultimate spenders.
• D) Those seeking loans from the bank are the ultimate spenders; the bank's stockholders are the ultimate lenders.

Understand the Capital Allocation Line (CAL) and its significance.

Differentiate among different types of risks (market risk, unique risk, firm-specific risk, diversifiable risk).

Be familiar with Markowitz portfolio theory and the concept of optimal risky portfolio.

Calculate and interpret the expected rates of return and standard deviations for portfolios.

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Definitions:

Nontaxable Social Security

Portions of Social Security benefits that are not subject to federal income tax under certain conditions.

AGI

Adjusted Gross Income; a measure of income calculated from your gross income and used to determine how much of your income is taxable.

Child and Dependent Care Credit

A tax credit in the U.S. for qualified expenses paid for the care of children under 13 or disabled dependents, enabling the taxpayer to work or look for work.

Qualified Day Care

A childcare facility meeting specific regulatory standards and qualifications, which expenses for may be deductible or eligible for specific tax credits.