Question 1

As of 2012, mortgage-backed securities made up approximately what portion of securities held by a bank?

Accepted Answer

A) 5% 
B) 20% 
C) 50% 
D) 70% 
A) 5% 
B) 20% 
C) 50% 
D) 70%

Question 2

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 3

The interest rate on unsecured loans between banks is called the

Accepted Answer

A) discount rate. 
B) repurchase rate. 
C) T-bill rate. 
D) federal funds rate. 
A) discount rate. 
B) repurchase rate. 
C) T-bill rate. 
D) federal funds rate.

Question 4

How can banks measure interest-rate risk?

Accepted Answer

Bank managers use gap analysis and durat

Question 5

Which of the following involves banks borrowing funds from firms or other banks using the value of underlying securities as collateral?

Accepted Answer

A) federal funds 
B) repurchase agreement 
C) counterparty lending 
D) money market account 
A) federal funds 
B) repurchase agreement 
C) counterparty lending 
D) money market account

Question 6

The ratio of bank capital to bank assets is known as the bank's

Accepted Answer

A) leverage ratio. 
B) net interest margin. 
C) return on equity. 
D) return on capital. 
A) leverage ratio. 
B) net interest margin. 
C) return on equity. 
D) return on capital.

Question 7

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.

Question 8

What is the largest category of bank assets?

Accepted Answer

A) loans 
B) reserves 
C) securities 
D) cash items in the process of collection 
A) loans 
B) reserves 
C) securities 
D) cash items in the process of collection

Question 9

As a result of the financial crisis, checkable deposits:

Accepted Answer

A) became a smaller portion of overall liabilities 
B) experienced little change 
C) hit a new record high in terms of the percent of liabilities 
D) nearly doubled in terms of the percent of liabilities 
A) became a smaller portion of overall liabilities 
B) experienced little change 
C) hit a new record high in terms of the percent of liabilities 
D) nearly doubled in terms of the percent of liabilities

Question 10

Banks use repurchase agreements to

Accepted Answer

A) ensure that payments on consumer loans are made on time. 
B) borrow funds from business firms or other banks. 
C) guard against price fluctuations on long-term bonds. 
D) ensure that they always have enough funds on hand to meet their federal tax liabilities. 
A) ensure that payments on consumer loans are made on time. 
B) borrow funds from business firms or other banks. 
C) guard against price fluctuations on long-term bonds. 
D) ensure that they always have enough funds on hand to meet their federal tax liabilities.

Question 11

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 12

A balance sheet

Accepted Answer

A) is a statement showing an individual's or a firm's financial position at a particular point in time. 
B) is a statement showing an individual's or a firm's income over a period of time. 
C) is a statement listing the tax liabilities incurred by an individual or a firm. 
D) can be constructed for any nonfinancial firm, but cannot be constructed for a financial firm. 
A) is a statement showing an individual's or a firm's financial position at a particular point in time. 
B) is a statement showing an individual's or a firm's income over a period of time. 
C) is a statement listing the tax liabilities incurred by an individual or a firm. 
D) can be constructed for any nonfinancial firm, but cannot be constructed for a financial firm.

Question 13

The ratio of a bank's after-tax profit to bank capital is known as

Accepted Answer

A) net interest margin. 
B) return on equity. 
C) return on capital. 
D) spread. 
A) net interest margin. 
B) return on equity. 
C) return on capital. 
D) spread.

Question 14

States that restrict banks to having a single branch are said to require

Accepted Answer

A) mono banking. 
B) nonbank banking. 
C) unit banking. 
D) semi-banking. 
A) mono banking. 
B) nonbank banking. 
C) unit banking. 
D) semi-banking.

Question 15

Describe the three ways that banks normally earn revenue.

Accepted Answer

(1)By collecting fees from stores when d

Question 16

Currently, the FDIC insures deposits up to a limit of

Accepted Answer

A) $1000. 
B) $100,000. 
C) $250,000. 
D) $1,000,000. 
A) $1000. 
B) $100,000. 
C) $250,000. 
D) $1,000,000.

Question 17

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 18

Which of the following is a checkable deposit?

Accepted Answer

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

Question 19

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 20

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-

As of 2012, mortgage-backed securities made up approximately what portion of securities held by a bank?

Securities that banks sell and agree to repurchase are known as

The interest rate on unsecured loans between banks is called the

How can banks measure interest-rate risk?

Which of the following involves banks borrowing funds from firms or other banks using the value of underlying securities as collateral?

The ratio of bank capital to bank assets is known as the bank's

The interest rate on interbank loans is called the

What is the largest category of bank assets?

As a result of the financial crisis, checkable deposits:

Banks use repurchase agreements to

Bank capital is equal to

A balance sheet

The ratio of a bank's after-tax profit to bank capital is known as

States that restrict banks to having a single branch are said to require

Describe the three ways that banks normally earn revenue.

Currently, the FDIC insures deposits up to a limit of

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

Which of the following is a checkable deposit?

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?

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?

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

Investment Banks, Mutual Funds, Hedge Funds, and the Shadow Banking System

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

As of 2012, mortgage-backed securities made up approximately what portion of securities held by a bank?

Securities that banks sell and agree to repurchase are known as

The interest rate on unsecured loans between banks is called the

How can banks measure interest-rate risk?

Which of the following involves banks borrowing funds from firms or other banks using the value of underlying securities as collateral?

The ratio of bank capital to bank assets is known as the bank's

The interest rate on interbank loans is called the

What is the largest category of bank assets?

As a result of the financial crisis, checkable deposits:

Banks use repurchase agreements to

Bank capital is equal to

A balance sheet

The ratio of a bank's after-tax profit to bank capital is known as

States that restrict banks to having a single branch are said to require

Describe the three ways that banks normally earn revenue.

Currently, the FDIC insures deposits up to a limit of

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

Which of the following is a checkable deposit?

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?

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?

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

Investment Banks, Mutual Funds, Hedge Funds, and the Shadow Banking System

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