Question 1

Why would a bank usually want to minimize the amount of excess reserves it has on hand?

Accepted Answer

Reserves are assets held in the form of

Question 2

Which of the following statements is not true?

Accepted Answer

A) The largest source of funds for banks to lend comes from the owner's capital. 
B) Transaction deposits make up less than 10 percent of banks sources of funds. 
C) The largest sources of funds for banks are non-transactions accounts. 
D) Borrowing is a larger source of funds for banks than transaction deposits. 
A) The largest source of funds for banks to lend comes from the owner's capital. 
B) Transaction deposits make up less than 10 percent of banks sources of funds. 
C) The largest sources of funds for banks are non-transactions accounts. 
D) Borrowing is a larger source of funds for banks than transaction deposits.

Question 3

A bank that meets deposit withdrawal by borrowing additional funds will alter:

Accepted Answer

A) the asset side of their balance sheet. 
B) the liabilities side of the balance sheet. 
C) the amount of bank capital. 
D) the asset and liabilities side of the balance sheet. 
A) the asset side of their balance sheet. 
B) the liabilities side of the balance sheet. 
C) the amount of bank capital. 
D) the asset and liabilities side of the balance sheet.

Question 4

A repurchase agreement is:

Accepted Answer

A) an asset that represents the value of all collateral repossessed by the bank and held for sale. 
B) a long-term collateralized loan. 
C) an agreement where the parties agree to reverse the transaction on a specific day. 
D) only made between two or more banks. 
A) an asset that represents the value of all collateral repossessed by the bank and held for sale. 
B) a long-term collateralized loan. 
C) an agreement where the parties agree to reverse the transaction on a specific day. 
D) only made between two or more banks.

Question 5

Loans made in the federal funds market:

Accepted Answer

A) are highly collateralized. 
B) are made by the Federal Reserve System to the bank within 24 hours. 
C) are unsecured loans. 
D) are insured by the FDIC. 
A) are highly collateralized. 
B) are made by the Federal Reserve System to the bank within 24 hours. 
C) are unsecured loans. 
D) are insured by the FDIC.

Question 6

Regulators require a bank to hold some of its assets as reserves mainly to address:

Accepted Answer

A) liquidity risk. 
B) trading risk. 
C) credit risk. 
D) operational risk. 
A) liquidity risk. 
B) trading risk. 
C) credit risk. 
D) operational risk.

Question 7

Suppose a particular bank is very large in terms of assets, and makes consumer and residential loans as well as commercial and industrial loan.The bank is probably a:

Accepted Answer

A) regional or super-regional bank. 
B) money center bank. 
C) community bank. 
D) savings bank. 
A) regional or super-regional bank. 
B) money center bank. 
C) community bank. 
D) savings bank.

Question 8

Explain why a bank manager and a bank regulator would likely view the timing at which a loan should be charged to the loan loss reserve differently.

Accepted Answer

The loan loss reserve is part of a bank'

Question 9

If a bank has $150 million in assets and a net worth of $20 million, its asset-to-equity ratio is:

Accepted Answer

A) 6.5 to 1. 
B) 7.5 to 1. 
C) 0.13 to 1. 
D) 0.15 to 1. 
A) 6.5 to 1. 
B) 7.5 to 1. 
C) 0.13 to 1. 
D) 0.15 to 1.

Question 10

Which of the following statements best completes this sentence: "On a bank's balance sheet…"?

Accepted Answer

A) liabilities show the uses of funds and assets show the sources of funds. 
B) assets show the sources of funds and the net worth shows the uses of funds. 
C) net worth shows the sources of funds and liabilities show the uses of funds. 
D) liabilities show the sources of funds and assets show the uses of funds. 
A) liabilities show the uses of funds and assets show the sources of funds. 
B) assets show the sources of funds and the net worth shows the uses of funds. 
C) net worth shows the sources of funds and liabilities show the uses of funds. 
D) liabilities show the sources of funds and assets show the uses of funds.

Question 11

Considering the balance sheet for all commercial banks in the U.S., the largest category of assets is:

Accepted Answer

A) cash items. 
B) U.S.Government Securities. 
C) required reserves. 
D) loans. 
A) cash items. 
B) U.S.Government Securities. 
C) required reserves. 
D) loans.

Question 12

The difference between a bank's reserves and its required reserves is:

Accepted Answer

A) profits. 
B) net interest income. 
C) excess reserves. 
D) vault cash. 
A) profits. 
B) net interest income. 
C) excess reserves. 
D) vault cash.

Question 13

Considering the balance sheet for all commercial banks in the U.S., the net worth of banks is:

Accepted Answer

A) about 12% of total liabilities. 
B) about 5 times total assets. 
C) about the same as total assets. 
D) about 4 times total liabilities. 
A) about 12% of total liabilities. 
B) about 5 times total assets. 
C) about the same as total assets. 
D) about 4 times total liabilities.

Question 14

An argument that comes up from time to time is that credit unions have an advantage over other financial depository institutions in the sense that they are non-profit institutions and, therefore, are exempt from taxes on income that other private depository institutions pay.As a result, credit unions may be able to charge lower rates of interest to borrowers and pay a higher rate to depositors than these other institutions.What do you think of this argument?

Accepted Answer

The argument may have some validity as s

Question 15

Suppose that a bank initially has a leverage ratio of 8 to 1.If this bank increases its capital by $1 million and its assets by $10 million, then the bank's:

Accepted Answer

A) risk increases and its leverage decreases. 
B) liabilities decrease and its leverage increases. 
C) leverage decreases and its liabilities increase. 
D) leverage and risk increases. 
A) risk increases and its leverage decreases. 
B) liabilities decrease and its leverage increases. 
C) leverage decreases and its liabilities increase. 
D) leverage and risk increases.

Question 16

Bank's hold marketable securities as part of their assets.For U.S.banks these marketable securities include:

Accepted Answer

A) stocks and bonds. 
B) only the stocks of U.S.corporations. 
C) only the bonds of the U.S.treasury. 
D) only bonds. 
A) stocks and bonds. 
B) only the stocks of U.S.corporations. 
C) only the bonds of the U.S.treasury. 
D) only bonds.

Question 17

A bank that cannot meet its loan commitments is experiencing the results of:

Accepted Answer

A) interest rate risk. 
B) credit risk. 
C) trading risk. 
D) liquidity risk. 
A) interest rate risk. 
B) credit risk. 
C) trading risk. 
D) liquidity risk.

Why would a bank usually want to minimize the amount of excess reserves it has on hand?

Which of the following statements is not true?

A bank that meets deposit withdrawal by borrowing additional funds will alter:

A repurchase agreement is:

Loans made in the federal funds market:

Regulators require a bank to hold some of its assets as reserves mainly to address:

Suppose a particular bank is very large in terms of assets, and makes consumer and residential loans as well as commercial and industrial loan.The bank is probably a:

Explain why a bank manager and a bank regulator would likely view the timing at which a loan should be charged to the loan loss reserve differently.

If a bank has $150 million in assets and a net worth of $20 million, its asset-to-equity ratio is:

Which of the following statements best completes this sentence: "On a bank's balance sheet…"?

Considering the balance sheet for all commercial banks in the U.S., the largest category of assets is:

The difference between a bank's reserves and its required reserves is:

Considering the balance sheet for all commercial banks in the U.S., the net worth of banks is:

Suppose that a bank initially has a leverage ratio of 8 to 1.If this bank increases its capital by $1 million and its assets by $10 million, then the bank's:

Bank's hold marketable securities as part of their assets.For U.S.banks these marketable securities include:

A bank that cannot meet its loan commitments is experiencing the results of:

An Introduction to Money and the Financial System

Money and the Payments System

Financial Instruments, Financial Markets, and Financial Institutions

Future Value, Present Value, and Interest Rates

Understanding Risk

Bonds, Bond Prices, and the Determination of Interest Rates

The Risk and Term Structure of Interest Rates

Stocks, Stock Markets, and Market Efficiency

Derivatives: Futures, Options, and Swaps

Foreign Exchange

The Economics of Financial Intermediation

Financial Industry Structure

Regulating the Financial System

Central Banks in the World Today

The Structure of Central Banks: The Federal Reserve and the European Central Bank

The Central Bank Balance Sheet and the Money Supply Process

Monetary Policy: Stabilizing the Domestic Economy

Exchange-Rate Policy and the Central Bank

Money Growth, Money Demand, and Modern Monetary Policy

Output, Inflation, and Monetary Policy

Understanding Business Cycle Fluctuations

Modern Monetary Policy and the Challenges Facing Central Bankers

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Exam 12: Depository Institutions: Banks and Bank Management

Why would a bank usually want to minimize the amount of excess reserves it has on hand?

Which of the following statements is not true?

A bank that meets deposit withdrawal by borrowing additional funds will alter:

A repurchase agreement is:

Loans made in the federal funds market:

Regulators require a bank to hold some of its assets as reserves mainly to address:

Suppose a particular bank is very large in terms of assets, and makes consumer and residential loans as well as commercial and industrial loan.The bank is probably a:

Explain why a bank manager and a bank regulator would likely view the timing at which a loan should be charged to the loan loss reserve differently.

If a bank has $150 million in assets and a net worth of $20 million, its asset-to-equity ratio is:

Which of the following statements best completes this sentence: "On a bank's balance sheet…"?

Considering the balance sheet for all commercial banks in the U.S., the largest category of assets is:

The difference between a bank's reserves and its required reserves is:

Considering the balance sheet for all commercial banks in the U.S., the net worth of banks is:

Suppose that a bank initially has a leverage ratio of 8 to 1.If this bank increases its capital by $1 million and its assets by $10 million, then the bank's:

Bank's hold marketable securities as part of their assets.For U.S.banks these marketable securities include:

A bank that cannot meet its loan commitments is experiencing the results of:

An Introduction to Money and the Financial System

Money and the Payments System

Financial Instruments, Financial Markets, and Financial Institutions

Future Value, Present Value, and Interest Rates

Understanding Risk

Bonds, Bond Prices, and the Determination of Interest Rates

The Risk and Term Structure of Interest Rates

Stocks, Stock Markets, and Market Efficiency

Derivatives: Futures, Options, and Swaps

Foreign Exchange

The Economics of Financial Intermediation

Financial Industry Structure

Regulating the Financial System

Central Banks in the World Today

The Structure of Central Banks: The Federal Reserve and the European Central Bank

The Central Bank Balance Sheet and the Money Supply Process

Monetary Policy: Stabilizing the Domestic Economy

Exchange-Rate Policy and the Central Bank

Money Growth, Money Demand, and Modern Monetary Policy

Output, Inflation, and Monetary Policy

Understanding Business Cycle Fluctuations

Modern Monetary Policy and the Challenges Facing Central Bankers

Filters