Question 1

What are the different forms of bank borrowings?

Accepted Answer

Borrowings include short-term

Question 2

Why do households hold less in checking accounts than they once did?

Accepted Answer

As wealth has increased,households have

Question 3

Bank capital is equal to

Accepted Answer

A)  the value of the capital originally invested in the bank by its owners. 
B)  the value of everything the bank owns. 
C)  the difference between the value of the bank's assets and the value of its liabilities. 
D)  the value of the buildings and other physical assets the bank owns. 
A)  the value of the capital originally invested in the bank by its owners. 
B)  the value of everything the bank owns. 
C)  the difference between the value of the bank's assets and the value of its liabilities. 
D)  the value of the buildings and other physical assets the bank owns.

Question 4

Suppose a bank has assets of $500 million and capital of $100 million.Its return on assets is -3%.What is its leverage ratio? What is its return on equity?

Accepted Answer

Its leverage ratio is bank cap

Question 5

A person takes out a car loan at a bank,but actually uses the money to play the lottery.This situation is an example of which problem banks face in lending?

Accepted Answer

A)  adverse selection 
B)  moral hazard 
C)  interest rate risk 
D)  illiquidity 
A)  adverse selection 
B)  moral hazard 
C)  interest rate risk 
D)  illiquidity

Question 6

Customers who have long-term relationships with banks

Accepted Answer

A)  pose particular problems with respect to adverse selection. 
B)  pose particular problems with respect to moral hazard. 
C)  often obtain credit at a lower rate or with fewer restrictions. 
D)  are more likely to default or violate restrictive covenants. 
A)  pose particular problems with respect to adverse selection. 
B)  pose particular problems with respect to moral hazard. 
C)  often obtain credit at a lower rate or with fewer restrictions. 
D)  are more likely to default or violate restrictive covenants.

Question 7

What four off-balance-sheet activities have banks come to rely on to earn fee income?

Accepted Answer

Standby letters of c

Question 8

Using statistical models to estimate the maximum losses a portfolio's value is likely to sustain over a particular time period is called

Accepted Answer

A)  gap analysis. 
B)  duration analysis. 
C)  value-at-risk approach. 
D)  credit-risk analysis. 
A)  gap analysis. 
B)  duration analysis. 
C)  value-at-risk approach. 
D)  credit-risk analysis.

Question 9

About what percentage of bank assets was made up of cash items in 2016?

Accepted Answer

A)  11% 
B)  22% 
C)  37% 
D)  59% 
A)  11% 
B)  22% 
C)  37% 
D)  59%

Question 10

Suppose a bank has $10 million in capital,$100 million in assets,and after-tax profit of $2 million.what is its return on assets? What is its return on equity?

Accepted Answer

Its return on assets is after-

Question 11

A financial contract in which a bank agrees to sell the expected future returns from an underlying bank loan to a third party is referred to as

Accepted Answer

A)  loan sale. 
B)  loan commitment. 
C)  credit rationing. 
D)  microlending. 
A)  loan sale. 
B)  loan commitment. 
C)  credit rationing. 
D)  microlending.

Question 12

Securities that banks sell and agree to repurchase are known as

Accepted Answer

A)  federal funds. 
B)  discount loans. 
C)  repurchase agreements. 
D)  NOW accounts. 
A)  federal funds. 
B)  discount loans. 
C)  repurchase agreements. 
D)  NOW accounts.

Question 13

Which of the following is NOT a nontransaction deposit?

Accepted Answer

A)  a money market deposit account 
B)  a certificate of deposit 
C)  a savings account 
D)  a NOW account 
A)  a money market deposit account 
B)  a certificate of deposit 
C)  a savings account 
D)  a NOW account

Question 14

Businesses hold substantial balances in demand deposits for all of the following reasons EXCEPT

Accepted Answer

A)  they cannot hold NOW accounts. 
B)  the existence of low transactions costs. 
C)  to maintain liquidity. 
D)  relatively high interest rates. 
A)  they cannot hold NOW accounts. 
B)  the existence of low transactions costs. 
C)  to maintain liquidity. 
D)  relatively high interest rates.

Question 15

If a bank's total assets = $3,500 billion,its total liabilities = $3,200 billion,and its bank capital = $300 billion,its bank capital as a percentage of assets is approximately

Accepted Answer

A)  8.6%. 
B)  9.4%. 
C)  11.7%. 
D)  91.4%. 
A)  8.6%. 
B)  9.4%. 
C)  11.7%. 
D)  91.4%.

Question 16

How does the use of adjustable-rate mortgages affect interest-rate risk?

Accepted Answer

A)  It reduces the interest-rate risk of lenders. 
B)  It reduces the interest-rte risk of borrowers. 
C)  It reduces the interest-rate risk of both lenders and borrowers. 
D)  It increases the interest-rate risk of both lenders and borrowers. 
A)  It reduces the interest-rate risk of lenders. 
B)  It reduces the interest-rte risk of borrowers. 
C)  It reduces the interest-rate risk of both lenders and borrowers. 
D)  It increases the interest-rate risk of both lenders and borrowers.

Question 17

The prime interest rate is the

Accepted Answer

A)  interest rate on six-month U.S. Treasury bills. 
B)  discount rate. 
C)  federal funds rate. 
D)  interest rate that banks charge high-quality borrowers. 
A)  interest rate on six-month U.S. Treasury bills. 
B)  discount rate. 
C)  federal funds rate. 
D)  interest rate that banks charge high-quality borrowers.

Question 18

What steps can a bank take to deal with a significant outflow of deposits?

Accepted Answer

Banks need to manage their assets so as

Question 19

Banks are exposed to interest rate risk primarily because

Accepted Answer

A)  interest rates are very difficult to forecast. 
B)  the maturities of banks' assets and liabilities differ. 
C)  borrowers from banks are prone to default. 
D)  depositors are always searching for a slightly higher interest rate. 
A)  interest rates are very difficult to forecast. 
B)  the maturities of banks' assets and liabilities differ. 
C)  borrowers from banks are prone to default. 
D)  depositors are always searching for a slightly higher interest rate.

Question 20

The very low interest rates following the financial crisis of 2007-2009 resulted in

Accepted Answer

A)  many people moving their funds from CDs and money market accounts to checking accounts in order to have more liquidity without sacrificing much interest. 
B)  funds being transferred from checking accounts to time deposits. 
C)  further declines in checking accounts that began in the early 1970s. 
D)  people switching their funds from checking deposits to CDs in the pursuit of higher interest rates. 
A)  many people moving their funds from CDs and money market accounts to checking accounts in order to have more liquidity without sacrificing much interest. 
B)  funds being transferred from checking accounts to time deposits. 
C)  further declines in checking accounts that began in the early 1970s. 
D)  people switching their funds from checking deposits to CDs in the pursuit of higher interest rates.

What are the different forms of bank borrowings?

Why do households hold less in checking accounts than they once did?

Bank capital is equal to

Suppose a bank has assets of $500 million and capital of $100 million.Its return on assets is -3%.What is its leverage ratio? What is its return on equity?

A person takes out a car loan at a bank,but actually uses the money to play the lottery.This situation is an example of which problem banks face in lending?

Customers who have long-term relationships with banks

What four off-balance-sheet activities have banks come to rely on to earn fee income?

Using statistical models to estimate the maximum losses a portfolio's value is likely to sustain over a particular time period is called

About what percentage of bank assets was made up of cash items in 2016?

Suppose a bank has $10 million in capital,$100 million in assets,and after-tax profit of $2 million.what is its return on assets? What is its return on equity?

A financial contract in which a bank agrees to sell the expected future returns from an underlying bank loan to a third party is referred to as

Securities that banks sell and agree to repurchase are known as

Which of the following is NOT a nontransaction deposit?

Businesses hold substantial balances in demand deposits for all of the following reasons EXCEPT

If a bank's total assets = $3,500 billion,its total liabilities = $3,200 billion,and its bank capital = $300 billion,its bank capital as a percentage of assets is approximately

How does the use of adjustable-rate mortgages affect interest-rate risk?

The prime interest rate is the

What steps can a bank take to deal with a significant outflow of deposits?

Banks are exposed to interest rate risk primarily because

The very low interest rates following the financial crisis of 2007-2009 resulted in

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

What are the different forms of bank borrowings?

Why do households hold less in checking accounts than they once did?

Bank capital is equal to

Suppose a bank has assets of $500 million and capital of $100 million.Its return on assets is -3%.What is its leverage ratio? What is its return on equity?

A person takes out a car loan at a bank,but actually uses the money to play the lottery.This situation is an example of which problem banks face in lending?

Customers who have long-term relationships with banks

What four off-balance-sheet activities have banks come to rely on to earn fee income?

Using statistical models to estimate the maximum losses a portfolio's value is likely to sustain over a particular time period is called

About what percentage of bank assets was made up of cash items in 2016?

Suppose a bank has $10 million in capital,$100 million in assets,and after-tax profit of $2 million.what is its return on assets? What is its return on equity?

A financial contract in which a bank agrees to sell the expected future returns from an underlying bank loan to a third party is referred to as

Securities that banks sell and agree to repurchase are known as

Which of the following is NOT a nontransaction deposit?

Businesses hold substantial balances in demand deposits for all of the following reasons EXCEPT

If a bank's total assets = $3,500 billion,its total liabilities = $3,200 billion,and its bank capital = $300 billion,its bank capital as a percentage of assets is approximately

How does the use of adjustable-rate mortgages affect interest-rate risk?

The prime interest rate is the

What steps can a bank take to deal with a significant outflow of deposits?

Banks are exposed to interest rate risk primarily because

The very low interest rates following the financial crisis of 2007-2009 resulted in

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