Question 1

An individual bank cannot create more money than it has excess reserves.

Accepted Answer

A) True 
 B)False

Question 2

In the U.S., state-chartered banks cannot be members of the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Question 3

Most bank revenues come from investments in marketable securities.

Accepted Answer

A) True 
 B)False

Question 4

Today, legal reserves for depository institutions consist of vault cash and deposits held at the regional Federal Reserve banks.

Accepted Answer

A) True 
 B)False

Question 5

Most loans granted by the U.S. commercial banks fit under which of the loan categories shown below?

Accepted Answer

A)  Installment loans to individuals and families 
B)  Commercial and industrial loans 
C)  Lease financing 
D)  Real estate loans 
E)  Loans to securities dealers and other banks 
A)  Installment loans to individuals and families 
B)  Commercial and industrial loans 
C)  Lease financing 
D)  Real estate loans 
E)  Loans to securities dealers and other banks

Question 6

Under the terms of NAFTA Canadian and U.S. banking organizations cannot branch directly into Mexico.

Accepted Answer

A) True 
 B)False

Question 7

Major banks have been shifting:

Accepted Answer

A)  More of their activities to the balance sheet 
B)  Less of their activities to the balance sheet 
C)  More of their activities to the owner's equity 
D)  Less of their activities to the owner's equity 
E)  None of the above 
A)  More of their activities to the balance sheet 
B)  Less of their activities to the balance sheet 
C)  More of their activities to the owner's equity 
D)  Less of their activities to the owner's equity 
E)  None of the above

Question 8

Recent changes in the banking industry should cause banks to be smaller in size and greater in number.

Accepted Answer

A) True 
 B)False

Question 9

Bank holding companies originated in the:

Accepted Answer

A)  16th century 
B)  17th century 
C)  18th century 
D)  19th century 
E)  None of the above 
A)  16th century 
B)  17th century 
C)  18th century 
D)  19th century 
E)  None of the above

Question 10

Noninterest margin measures the difference between:

Accepted Answer

A)  Interest paid on deposits and interest paid on long-term debt 
B)  Income and expenses for nontraditional banks services 
C)  Income paid on deposits and income received on loans 
D)  Fees paid on bank loans and fees paid on mortgages 
E)  None of the above 
A)  Interest paid on deposits and interest paid on long-term debt 
B)  Income and expenses for nontraditional banks services 
C)  Income paid on deposits and income received on loans 
D)  Fees paid on bank loans and fees paid on mortgages 
E)  None of the above

Question 11

Universal banks can offer security underwriting services, but cannot offer insurance services.

Accepted Answer

A) True 
 B)False

Question 12

Effective December 31, 2006, U.S. regulations require bankers to develop more sophisticated account access procedures in order to protect their online customers such as:

Accepted Answer

A)  Randomly asking a customer one or more personal questions 
B)  The use of tokens to randomize account passwords 
C)  Use of a customer's physical characteristics such as our retinal scan 
D)  All of the above 
E)  None of the above 
A)  Randomly asking a customer one or more personal questions 
B)  The use of tokens to randomize account passwords 
C)  Use of a customer's physical characteristics such as our retinal scan 
D)  All of the above 
E)  None of the above

Question 13

Suppose you have been given the financial information below for a commercial bank:
   
a. Please calculate this bank's net interest income, net noninterest income, net income before taxes, net income after taxes, undivided profits (or retained earnings), total revenues and total expenses. 
b. Suppose the above bank's return on assets - the ratio of its net income after taxes to total assets - is 0.85 percent. What is the total of the bank's assets in dollars?
c. Suppose this bank's return on stockholder's equity capital - the ratio of its net income after taxes to total equity capital - is 12 percent. What is the bank's total equity capital in dollars?
d. Suppose the above bank's total deposits equal 75 percent of its total liabilities. How many deposits in total dollar volume does the bank hold?

Accepted Answer

a. The bank's net interest income is $12

Question 14

When commercial banks make loans, the funds loaned are usually kept on deposit with the bank for long periods, rather than being immediately used by the borrower.

Accepted Answer

A) True 
 B)False

Question 15

An important tax shelter used by commercial banks today is:

Accepted Answer

A)  Commercial loans 
B)  Purchases of state and local government bonds 
C)  Borrowings in the money market 
D)  Purchases of corporate stock 
E)  None of the above 
A)  Commercial loans 
B)  Purchases of state and local government bonds 
C)  Borrowings in the money market 
D)  Purchases of corporate stock 
E)  None of the above

Question 16

The shift toward more expensive interest-bearing deposits is in part due to better cash management practices on the part of corporations.

Accepted Answer

A) True 
 B)False

Question 17

NAFTA is an economic alliance between the U.S. and Canada.

Accepted Answer

A) True 
 B)False

Question 18

During the late 1980s and into the early 1990s, banks sold blocks of loans to raise capital.

Accepted Answer

A) True 
 B)False

Question 19

According to the textbook, interstate banking should become more common in future years due to the:

Accepted Answer

A)  New interstate banking bill passed in 1994 
B)  Collapse of many small banks 
C)  Presence of nonbank competitors 
D)  Negative profits of many banks 
E)  None of the above 
A)  New interstate banking bill passed in 1994 
B)  Collapse of many small banks 
C)  Presence of nonbank competitors 
D)  Negative profits of many banks 
E)  None of the above

Question 20

If a bank issues a standby credit letter for XYZ Corporation and XYZ Corporation files for bankruptcy,

Accepted Answer

A)  The bank will be liable for the loss covered by the standby credit letter 
B)  The bank sells the standby credit letter 
C)  The bank will receive preferential treatment in bankruptcy court 
D)  Banks rarely issue standby credit letters because the default rate is so high 
E)  None of the above 
A)  The bank will be liable for the loss covered by the standby credit letter 
B)  The bank sells the standby credit letter 
C)  The bank will receive preferential treatment in bankruptcy court 
D)  Banks rarely issue standby credit letters because the default rate is so high 
E)  None of the above

Exam 14: Banking and Financial Services: Regulations, Operations, and Trends

An individual bank cannot create more money than it has excess reserves.

In the U.S., state-chartered banks cannot be members of the Federal Reserve System.

Most bank revenues come from investments in marketable securities.

Today, legal reserves for depository institutions consist of vault cash and deposits held at the regional Federal Reserve banks.

Most loans granted by the U.S. commercial banks fit under which of the loan categories shown below?

Under the terms of NAFTA Canadian and U.S. banking organizations cannot branch directly into Mexico.

Major banks have been shifting:

Recent changes in the banking industry should cause banks to be smaller in size and greater in number.

Bank holding companies originated in the:

Noninterest margin measures the difference between:

Universal banks can offer security underwriting services, but cannot offer insurance services.

Effective December 31, 2006, U.S. regulations require bankers to develop more sophisticated account access procedures in order to protect their online customers such as:

When commercial banks make loans, the funds loaned are usually kept on deposit with the bank for long periods, rather than being immediately used by the borrower.

An important tax shelter used by commercial banks today is:

The shift toward more expensive interest-bearing deposits is in part due to better cash management practices on the part of corporations.

NAFTA is an economic alliance between the U.S. and Canada.

During the late 1980s and into the early 1990s, banks sold blocks of loans to raise capital.

According to the textbook, interstate banking should become more common in future years due to the:

If a bank issues a standby credit letter for XYZ Corporation and XYZ Corporation files for bankruptcy,

Understanding the Financial System and Its Impact on the Economy and Markets

Financial Systems, Monetary Units, and the Role of Money in the Economy

Financial Indices, Market Information, and Economic Data

The Financial Crisis and Its Impact on the Mortgage Market and Economy

Understanding Interest Rates, Savings, and the Wealth Effect

Financial Concepts and Interest Rates

Effects of Inflation and Yield Curves on Stock Prices and Investments

Understanding Risk and Market Factors in Financial Securities

Exploring Financial Markets and Hedging Strategies

Factors Affecting the Volume of CDs

Exploring the Reserve Accounting System, Money Markets, and Financial Instruments

Exploring Central Banks and Their Impact on the Economy and Financial System

Central Banking and Monetary Policy: Exploring Tools and Strategies

Comparative Analysis of Financial Institutions and Their Operations

Exploring Various Aspects of Pension Funds, Finance Companies, and Insurance Industry

The Impact of Deregulation and Regulation on Financial Institutions and Banking Industry in the United States

Treasury Auctions, Public Debt, and Government Borrowing: Exploring the Us Treasury System

Corporate Bond Pricing, Market Development, and Financing Strategies

The Truth About Regulation Fd and Stock Holdings: Debunking Common Myths in the Financial Market

Flexible Savings Account Options

Mortgage Market and Mortgage Instruments

International Financial Transactions and Balance of Payments

International Banking and Financial Regulations

Exploring the Complexities of Financial Services and Regulation

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