Bank Regulators Impose Capital Requirements in Order to

question 369

Multiple Choice

Bank regulators impose capital requirements in order to

• A)increase the amount of leverage in the economy.
• B)provide an incentive for banks to hold risky assets.
• C)ensure banks can pay off depositors.
• D)increase the probability of a credit crunch.

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Definitions:

Stock Price

The current price at which a share of a company is being traded on the stock market.

Exercise Price

Another term for strike price, specifically the price at which an option or warrant can be executed.

Put Option

An agreement allowing the owner the option, yet not the requirement, to sell a predetermined quantity of a foundational asset at an agreed price during a defined period.

Call Option

A financial contract giving the buyer the right, but not the obligation, to buy an underlying asset at a predetermined price within a specific time period.