Financial Regulation And Ethics Quiz

1.

Ethical systems (better examples and reduced systemic conflicts) have been shown to reduce unethical behavior.

A.

True
B.

False

Correct Answer
A. True

Explanation
Ethical systems, which involve better examples and reduced systemic conflicts, have been proven to effectively decrease unethical behavior. This means that when individuals are exposed to ethical models and systems that promote moral values and discourage unethical actions, they are more likely to behave ethically themselves. This is supported by research and evidence, indicating that the statement is true.

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2.

Which of the video speakers in the helpified tool-set focuses more on the legal reasons for being ethical?

A.

Dr. Julius Coles
B.

Frank Buccaro (importance of Ethics in Business)
C.

Dr. Freeman of the Darden school
D.

Michael Jensen

Correct Answer
A. Dr. Julius Coles

Explanation
Dr. Julius Coles is the video speaker in the helpified tool-set who focuses more on the legal reasons for being ethical.

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3.

Behaving ethically can _____

A.

Lower likelihood of lawsuits and criminal charges
B.

Reduce transaction costs
C.

Lead to higher market values
D.

All of the above

Correct Answer
D. All of the above

Explanation
Behaving ethically can have several positive outcomes. It can lower the likelihood of lawsuits and criminal charges by ensuring that individuals and organizations act in accordance with legal and moral standards. Additionally, ethical behavior can reduce transaction costs by promoting trust and cooperation among parties involved. Lastly, behaving ethically can lead to higher market values as consumers and investors tend to favor companies with strong ethical practices, which can result in increased profitability and market performance. Therefore, all of the above statements are true.

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4.

Which of the following is true?

A.

Holding other things constant, ethical firms should have a higher price to book value.
B.

Shareholder interests are solely dependent of short run cash flow maximization.
C.

Nice firms finish last more often than not.
D.

Buyer beware is all the ethics you will ever need.

Correct Answer
A. Holding other things constant, ethical firms should have a higher price to book value.

Explanation
Ethical firms should have a higher price to book value because they are more likely to have strong corporate governance practices and transparent financial reporting. This can attract investors who are willing to pay a premium for the company's shares, leading to a higher price to book value ratio. Additionally, ethical firms are less likely to engage in unethical practices or fraudulent activities, which can negatively impact their book value. Therefore, the market tends to value ethical firms more highly, resulting in a higher price to book value ratio.

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5.

According to the CFA guidelines, which of the following is NOT ethical

A.

Putting your own interests before the client
B.

Increasing transparency
C.

Encouraging a reduction in conflicts of interest through better systems.
D.

Continual learning and improvement for all knowledge workers.

Correct Answer
A. Putting your own interests before the client

Explanation
Putting your own interests before the client is not ethical according to the CFA guidelines. This means that as a finance professional, you should prioritize the client's interests and act in their best interest rather than pursuing your own personal gain. This principle is important for maintaining trust and integrity in the financial industry.

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6.

A problem with trying to teach ethical behavior in business classes is

A.

What is ethical to one person, may be unethical to another
B.

Students often find it difficult to see themselves doing anything unethical
C.

Ethics often seen as something better left for liberal arts and religion classes
D.

All of the above

Correct Answer
D. All of the above

Explanation
Teaching ethical behavior in business classes can be challenging because different individuals may have varying interpretations of what is considered ethical. What one person perceives as ethical, another may view as unethical. Additionally, students may struggle to envision themselves engaging in any unethical behavior, making it difficult for them to grasp the importance of ethical decision-making. Moreover, ethics is often regarded as a topic more suitable for liberal arts and religion classes, which further complicates its integration into business education. Therefore, all of the given reasons contribute to the difficulty of teaching ethical behavior in business classes.

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7.

"Thou shall nots" are seen as

A.

Negative ethics
B.

Normative ethics
C.

Positive ethics
D.

The best way to deal with ethics as there are no conflicts

Correct Answer
A. Negative ethics

Explanation
"Thou shall nots" are seen as negative ethics because they focus on prohibiting certain actions or behaviors. This approach emphasizes what should not be done, rather than promoting positive actions or behaviors. Negative ethics typically involve setting boundaries and restrictions to prevent unethical behavior, but they may not provide clear guidance on what should be done in ethical dilemmas.

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1

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8.

Which term describes the situation where a financial institution is so large that it fails, it will impact the whole economy negatively and bring about the failure of the economic system?

A.

Too small to accused
B.

Too small to fail
C.

Too big to fail
D.

Too big to succeed

Correct Answer
C. Too big to fail

Explanation
The term "Too big to fail" describes the situation where a financial institution is so large that if it were to fail, it would have a negative impact on the entire economy and potentially lead to the failure of the economic system. This concept suggests that certain institutions are considered too important and interconnected to be allowed to fail, and therefore, they may receive government support or bailouts to prevent their collapse.

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9.

Which of the following is/are parts of the CAMELS rating criteria?

A.

Asset quality
B.

Capital adequacy
C.

Earnings
D.

All of the above

Correct Answer
D. All of the above

Explanation
The CAMELS rating criteria is a system used by bank regulators to evaluate the financial health of banks. It stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk. The question asks which of the given options are parts of the CAMELS rating criteria, and the correct answer is "All of the above" because asset quality, capital adequacy, and earnings are indeed components of the CAMELS rating criteria.

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10.

Ethical banking should overlook the consciousness of banking practices that affect society and the environment.

A.

True
B.

False

Correct Answer
A. True

Explanation
Ethical banking refers to a banking system that takes into consideration the impact of its practices on society and the environment. It aims to promote sustainable and responsible financial activities. Therefore, it is logical to conclude that ethical banking should indeed prioritize the consciousness of banking practices that affect society and the environment. Hence, the given answer "True" is correct.

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