1.   [Chapter 2, Question 4]  Consider the following statement: “ All financial intermediaries provide the same economic functions.  Therefore, the same investment strategy should be used in the management of all financial intermediaries.”  Is this statement true or false?

2.   [Based on Chapter 2, Question 7]  Each Year, millions of American investors pour billions of dollar into mutual funds, which use those dollars to buy the common stock of other companies.  What do the mutual funds offer investors with this indirect investment, relative to directly investing in the common stock of companies?.

3.  [Based on Chapter 1, Question 11].  Do U.S. Treasury securities carry any risk?  Explain your answer.

4.  Explain the problems associated with the McFadden Act and Glass Steagall Act which lead their repeal in the 1990s

5.  Consider the risk-based capital requirement described in chapter 4.   Consider the assets held by the two banks in the tables below.

Bank 1                                                                                                                                              Bank 2

Asset	Value (millions)		Asset	Value (millions)
U.S. Treasury Securities	$200		U.S. Treasury Securities	$100
Residential Mortgages	$400		Residential Mortgages	$600
Commercial Loans	$500		Commercial Loans	$200
Corporate Bonds	$100		Municipal Revenue Bonds	$100

Suppose the total capital requirement is 8% on risk-weighted assets.  Calculate the amount of required total capital for each bank, using the weights  on page 55. What is the general relationship between required capital and the risk of the asset portfolio?