Question 1

The interest rate on interbank loans is called the

Accepted Answer

A)  discount rate. 
B)  federal funds rate. 
C)  repo rate. 
D)  prime rate. 
A)  discount rate. 
B)  federal funds rate. 
C)  repo rate. 
D)  prime rate. B

Question 2

FICO scores range from

Accepted Answer

A)  1 to 100. 
B)  300 to 850. 
C)  Aaa to F. 
D)  A+ to D-. 
A)  1 to 100. 
B)  300 to 850. 
C)  Aaa to F. 
D)  A+ to D-. B

Question 3

As of 2016,mortgage-backed securities made up what portion of securities held by a bank?

Accepted Answer

A)  5% 
B)  29% 
C)  57% 
D)  75% 
A)  5% 
B)  29% 
C)  57% 
D)  75% C

Question 4

Which of the following is a name for when a bank promises to lend funds to a borrower to pay off its commercial paper?

Accepted Answer

A)  loan commitment 
B)  standby letter of credit 
C)  securitization 
D)  loan sale 
A)  loan commitment 
B)  standby letter of credit 
C)  securitization 
D)  loan sale

Question 5

The FDIC was created in

Accepted Answer

A)  1863. 
B)  1913. 
C)  1934. 
D)  1991. 
A)  1863. 
B)  1913. 
C)  1934. 
D)  1991.

Question 6

Moral hazard can contribute to high bank leverage in all of the following ways EXCEPT

Accepted Answer

A)  having high capital requirements. 
B)  bank managers are compensated in part on providing shareholders with high returns on equity. 
C)  high bank leverage provides shareholders with a potential for a higher return on equity. 
D)  federal deposit insurance has reduced the incentive of depositors to monitor the behavior of bank managers. 
A)  having high capital requirements. 
B)  bank managers are compensated in part on providing shareholders with high returns on equity. 
C)  high bank leverage provides shareholders with a potential for a higher return on equity. 
D)  federal deposit insurance has reduced the incentive of depositors to monitor the behavior of bank managers.

Question 7

FICO scores are based on information gathered from the three major credit reporting agencies.Which of the following is NOT one of those agencies?

Accepted Answer

A)  Equifax 
B)  Experian 
C)  TransUnion 
D)  FDIC 
A)  Equifax 
B)  Experian 
C)  TransUnion 
D)  FDIC

Question 8

In which of the following assets are commercial banks in the United States NOT allowed to invest checkable deposits?

Accepted Answer

A)  home mortgages 
B)  corporate bonds 
C)  municipal bonds 
D)  U.S. Treasury bonds 
A)  home mortgages 
B)  corporate bonds 
C)  municipal bonds 
D)  U.S. Treasury bonds

Question 9

Which of the following is a bank asset?

Accepted Answer

A)  checkable deposits 
B)  savings deposits 
C)  borrowings in the federal funds market 
D)  cash items in the process of collection 
A)  checkable deposits 
B)  savings deposits 
C)  borrowings in the federal funds market 
D)  cash items in the process of collection

Question 10

How do banks manage credit risk?

Accepted Answer

Banks manage credit risk through diversi

Question 11

Why are U.S.government securities referred to as a bank's secondary reserves?

Accepted Answer

A)  Their current market value may count toward meeting a bank's legal reserve requirements. 
B)  They are very liquid. 
C)  Banks are legally required to hold a certain minimum amount of these securities. 
D)  They are the same thing as vault cash. 
A)  Their current market value may count toward meeting a bank's legal reserve requirements. 
B)  They are very liquid. 
C)  Banks are legally required to hold a certain minimum amount of these securities. 
D)  They are the same thing as vault cash.

Question 12

The process by which banks screen potential applicants by eliminating bad risks and to obtain a pool of creditworthy borrowers is called

Accepted Answer

A)  gap analysis. 
B)  duration analysis. 
C)  credit-risk analysis. 
D)  liquidity analysis. 
A)  gap analysis. 
B)  duration analysis. 
C)  credit-risk analysis. 
D)  liquidity analysis.

Question 13

Geographic restrictions on banks

Accepted Answer

A)  reduce their ability to take advantage of economies of scale. 
B)  raise the costs of their providing risk-sharing, liquidity, and information services. 
C)  reduce their exposure to credit risk. 
D)  reduce the amount of local lending they undertake. 
A)  reduce their ability to take advantage of economies of scale. 
B)  raise the costs of their providing risk-sharing, liquidity, and information services. 
C)  reduce their exposure to credit risk. 
D)  reduce the amount of local lending they undertake.

Question 14

Since most banks have positive gaps and negative duration gaps,an increase in market interest rates will

Accepted Answer

A)  increase bank profits and increase bank capital. 
B)  increase bank profits and decrease bank capital. 
C)  decrease bank profits and increase bank capital. 
D)  decrease bank profits and decrease bank capital. 
A)  increase bank profits and increase bank capital. 
B)  increase bank profits and decrease bank capital. 
C)  decrease bank profits and increase bank capital. 
D)  decrease bank profits and decrease bank capital.

Question 15

Which of the following helps explain why depositors sometimes put their funds in demand deposits rather than NOW accounts?

Accepted Answer

A)  Demand deposits pay interest, whereas NOW accounts do not pay interest. 
B)  Businesses may not hold NOW accounts. 
C)  Checks may be written against demand deposits, but not against NOW accounts. 
D)  Demand deposits are more liquid than NOW accounts. 
A)  Demand deposits pay interest, whereas NOW accounts do not pay interest. 
B)  Businesses may not hold NOW accounts. 
C)  Checks may be written against demand deposits, but not against NOW accounts. 
D)  Demand deposits are more liquid than NOW accounts.

Question 16

In banking,the spread refers to the difference between the

Accepted Answer

A)  interest rate on long-term bonds and the interest rate on short-term bonds. 
B)  interest rate on car loans and the interest rate on home mortgages. 
C)  average interest rate earned on assets and the average interest rate paid on liabilities. 
D)  bid and asked prices on a bond. 
A)  interest rate on long-term bonds and the interest rate on short-term bonds. 
B)  interest rate on car loans and the interest rate on home mortgages. 
C)  average interest rate earned on assets and the average interest rate paid on liabilities. 
D)  bid and asked prices on a bond.

Question 17

Excess reserves equal

Accepted Answer

A)  total reserves less required reserves. 
B)  required reserves less total reserves. 
C)  total reserves plus required reserves. 
D)  required reserves divided by total reserves. 
A)  total reserves less required reserves. 
B)  required reserves less total reserves. 
C)  total reserves plus required reserves. 
D)  required reserves divided by total reserves.

Question 18

Suppose First National Bank has $200 million of assets and $20 million of equity capital.If First National has a 2% return on assets (ROA),what is its return on equity (ROE)? Suppose First National's equity capital declines to $10 million,while its assets and ROA are unchanged.What is First National's ROE now?

Accepted Answer

ROE = ROA × (Bank assets / Ban

Question 19

Bank capital is

Accepted Answer

A)  the current market value of the bank's physical assets. 
B)  the historical or original value of the bank's physical assets. 
C)  the capital contributed by the bank's shareholders plus accumulated retained profits. 
D)  the sum of the value of the bank's assets plus the value of the bank's liabilities. 
A)  the current market value of the bank's physical assets. 
B)  the historical or original value of the bank's physical assets. 
C)  the capital contributed by the bank's shareholders plus accumulated retained profits. 
D)  the sum of the value of the bank's assets plus the value of the bank's liabilities.

Question 20

How can banks measure interest-rate risk?

Accepted Answer

Bank managers use gap analysis and durat

The interest rate on interbank loans is called the

FICO scores range from

As of 2016,mortgage-backed securities made up what portion of securities held by a bank?

Which of the following is a name for when a bank promises to lend funds to a borrower to pay off its commercial paper?

The FDIC was created in

Moral hazard can contribute to high bank leverage in all of the following ways EXCEPT

FICO scores are based on information gathered from the three major credit reporting agencies.Which of the following is NOT one of those agencies?

In which of the following assets are commercial banks in the United States NOT allowed to invest checkable deposits?

Which of the following is a bank asset?

How do banks manage credit risk?

Why are U.S.government securities referred to as a bank's secondary reserves?

The process by which banks screen potential applicants by eliminating bad risks and to obtain a pool of creditworthy borrowers is called

Geographic restrictions on banks

Since most banks have positive gaps and negative duration gaps,an increase in market interest rates will

Which of the following helps explain why depositors sometimes put their funds in demand deposits rather than NOW accounts?

In banking,the spread refers to the difference between the

Excess reserves equal

Bank capital is

How can banks measure interest-rate risk?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I- the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters

Exam 10: The Economics of Banking

The interest rate on interbank loans is called the

FICO scores range from

As of 2016,mortgage-backed securities made up what portion of securities held by a bank?

Which of the following is a name for when a bank promises to lend funds to a borrower to pay off its commercial paper?

The FDIC was created in

Moral hazard can contribute to high bank leverage in all of the following ways EXCEPT

FICO scores are based on information gathered from the three major credit reporting agencies.Which of the following is NOT one of those agencies?

In which of the following assets are commercial banks in the United States NOT allowed to invest checkable deposits?

Which of the following is a bank asset?

How do banks manage credit risk?

Why are U.S.government securities referred to as a bank's secondary reserves?

The process by which banks screen potential applicants by eliminating bad risks and to obtain a pool of creditworthy borrowers is called

Geographic restrictions on banks

Since most banks have positive gaps and negative duration gaps,an increase in market interest rates will

Which of the following helps explain why depositors sometimes put their funds in demand deposits rather than NOW accounts?

In banking,the spread refers to the difference between the

Excess reserves equal

Bank capital is

How can banks measure interest-rate risk?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I- the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters