Question 1

Business loans have dropped in importance since 1987 as measured by the proportion of these loans on the bank balance sheet.

Accepted Answer

A) True 
 B)False

Question 2

State chartered banks ________________ be members of the Federal Reserve System and nationally chartered banks ________________ be members of the Federal Reserve System.

Accepted Answer

A) must; may 
B) must; must 
C) may; must 
D) may; may 
A) must; may 
B) must; must 
C) may; must 
D) may; may

Question 3

Loans past due 90 days or more and loans that are not accruing interest because of problems of the borrower are called

Accepted Answer

A) loan losses. 
B) net charge-offs. 
C) provisional loans. 
D) noncurrent loans. 
E) contra loans. 
A) loan losses. 
B) net charge-offs. 
C) provisional loans. 
D) noncurrent loans. 
E) contra loans.

Question 4

The ROA for financial institutions such as banks is typically quite low as compared to nonfinancial firms. Why?
 With such a low ROA,how can banks attract stockholders?

Accepted Answer

Microeconomics tells us that firms earn

Question 5

Loans comprise the single largest asset category for a bank.

Accepted Answer

A) True 
 B)False

Question 6

About __________________ of federally insured banks are nationally chartered and about __________________ of federally insured banks are members of the Federal Reserve.

Accepted Answer

A) 77 percent; 65 percent 
B) 65 percent; 77 percent 
C) 34 percent; 22 percent 
D) 20 percent; 34 percent 
E) 40 percent; 60 percent 
A) 77 percent; 65 percent 
B) 65 percent; 77 percent 
C) 34 percent; 22 percent 
D) 20 percent; 34 percent 
E) 40 percent; 60 percent

Question 7

Reasons behind the drop in bank profitability in the second half of the previous decade include
I. flattening of the yield curve.
II. increase in competitive pressures on asset pricing.
III. increases in foreclosures in the mortgage market.
IV. increases in net interest margin.

Accepted Answer

A) I only 
B) II and III only 
C) I,II,and III only 
D) II,III,and IV only 
E) III and IV only 
A) I only 
B) II and III only 
C) I,II,and III only 
D) II,III,and IV only 
E) III and IV only

Question 8

Bank assets tend to have _____________ maturities and _____________ liquidity than/as bank liabilities.

Accepted Answer

A) longer; greater 
B) longer; lower 
C) shorter; greater 
D) shorter; lower 
E) equal; equal 
A) longer; greater 
B) longer; lower 
C) shorter; greater 
D) shorter; lower 
E) equal; equal

Question 9

Banks have an average total debt ratio of about 90 percent.

Accepted Answer

A) True 
 B)False

Question 10

The largest single category of loans on the typical bank's balance sheet in 2013 was

Accepted Answer

A) U.S. government securities. 
B) commercial and industrial loans. 
C) consumer loans. 
D) real estate loans. 
E) interbank loans. 
A) U.S. government securities. 
B) commercial and industrial loans. 
C) consumer loans. 
D) real estate loans. 
E) interbank loans.

Question 11

Banking may be subdivided into at least three categories of banks. Match the definitions with the appropriate name. I. A bank that specializes in retail or consumer banking in a local market
II. A bank that engages in a complete array of wholesale commercial banking activities and usually also provides retail banking services
III. A bank that is located in a financial center and relies on nondeposit or borrowed sources of funds for a significant portion of its liabilities

Accepted Answer

A) money center bank; community bank; super-regional bank 
B) community bank; money center bank; super-regional bank 
C) super-regional bank; money center bank; community bank 
D) money center bank; super-regional bank; community bank 
E) community bank; super-regional bank; money center bank 
A) money center bank; community bank; super-regional bank 
B) community bank; money center bank; super-regional bank 
C) super-regional bank; money center bank; community bank 
D) money center bank; super-regional bank; community bank 
E) community bank; super-regional bank; money center bank

Question 12

Most non-financial firms would never hold as much of their assets in safe liquid securities as banks do. Why do banks maintain such a high percentage of investment in securities?

Accepted Answer

To answer this we must look at the right

Question 13

Commercial banks are the __________________ financial intermediary in the United States as measured by asset size.

Accepted Answer

A) largest 
B) second-largest 
C) third-largest 
D) fourth-largest 
E) fifth-largest 
A) largest 
B) second-largest 
C) third-largest 
D) fourth-largest 
E) fifth-largest

Question 14

Discuss the major differences between large banks and small banks. Which have had higher ROAs?
 Why?

Accepted Answer

Large banks tend to have
*lower equity (

Question 15

Equity capital at commercial banks in 2013 comprised about ____________ of liabilities and equity.

Accepted Answer

A) 25 percent 
B) 21 percent 
C) 55 percent 
D) 11 percent 
E) 5 percent 
A) 25 percent 
B) 21 percent 
C) 55 percent 
D) 11 percent 
E) 5 percent

Question 16

Why did bank profitability decline beginning in late 2006 and through 2008?

Accepted Answer

Increased loan loss provisions,reduced s

Question 17

In 2010,the notional value of bank off-balance-sheet activities was greater than bank industry assets.

Accepted Answer

A) True 
 B)False

Question 18

In comparison to small banks,larger banks typically have

Accepted Answer

A) more equity capital. 
B) more core deposits. 
C) more off-balance-sheet activities. 
D) larger net interest margins. 
E) all of the options. 
A) more equity capital. 
B) more core deposits. 
C) more off-balance-sheet activities. 
D) larger net interest margins. 
E) all of the options.

Question 19

The provision of banking services to other banks,such as check clearing,foreign exchange trading,and so forth,is an example of

Accepted Answer

A) correspondent banking. 
B) trust services. 
C) off-balance-sheet assets. 
D) economies of scope. 
E) credit derivatives. 
A) correspondent banking. 
B) trust services. 
C) off-balance-sheet assets. 
D) economies of scope. 
E) credit derivatives.

Question 20

In terms of profitability,a well-run bank usually has an ROA of

Accepted Answer

A) 0.5-3 percent. 
B) 3-5 percent. 
C) 5-10 percent. 
D) 10-15 percent. 
E) 15-20 percent. 
A) 0.5-3 percent. 
B) 3-5 percent. 
C) 5-10 percent. 
D) 10-15 percent. 
E) 15-20 percent.

Exam 11: Commercial Banks: Industry Overview

Business loans have dropped in importance since 1987 as measured by the proportion of these loans on the bank balance sheet.

State chartered banks ________________ be members of the Federal Reserve System and nationally chartered banks ________________ be members of the Federal Reserve System.

Loans past due 90 days or more and loans that are not accruing interest because of problems of the borrower are called

The ROA for financial institutions such as banks is typically quite low as compared to nonfinancial firms. Why? With such a low ROA,how can banks attract stockholders?

Loans comprise the single largest asset category for a bank.

About __________________ of federally insured banks are nationally chartered and about __________________ of federally insured banks are members of the Federal Reserve.

Reasons behind the drop in bank profitability in the second half of the previous decade include I. flattening of the yield curve. II. increase in competitive pressures on asset pricing. III. increases in foreclosures in the mortgage market. IV. increases in net interest margin.

Bank assets tend to have _____________ maturities and _____________ liquidity than/as bank liabilities.

Banks have an average total debt ratio of about 90 percent.

The largest single category of loans on the typical bank's balance sheet in 2013 was

Most non-financial firms would never hold as much of their assets in safe liquid securities as banks do. Why do banks maintain such a high percentage of investment in securities?

Commercial banks are the __________________ financial intermediary in the United States as measured by asset size.

Discuss the major differences between large banks and small banks. Which have had higher ROAs? Why?

Equity capital at commercial banks in 2013 comprised about ____________ of liabilities and equity.

Why did bank profitability decline beginning in late 2006 and through 2008?

In 2010,the notional value of bank off-balance-sheet activities was greater than bank industry assets.

In comparison to small banks,larger banks typically have

The provision of banking services to other banks,such as check clearing,foreign exchange trading,and so forth,is an example of

In terms of profitability,a well-run bank usually has an ROA of

Introduction

Determinants of Interest Rates

Interest Rates and Security Valuation

The Federal Reserve System, Monetary Policy, and Interest Rates

Money Markets

Bond Markets

Mortgage Markets

Stock Markets

Foreign Exchange Markets

Derivative Securities Markets

Commercial Banks Financial Statements and Analysis

Regulation of Commercial Banks

Other Lending Institutions: Savings Institutions, Credit Unions, and Finance Companies

Insurance Companies

Securities Firms and Investment Banks

Investment Companies

Pension Funds

Types of Risks Incurred by Financial Institutions

Managing Credit Risk on the Balance Sheet

Managing Liquidity Risk on the Balance Sheet

Managing Interest Rate Risk and Insolvency Risk on the Balance Sheet

Managing Risk Off the Balance Sheet With Derivative Securities

Managing Risk Off the Balance Sheet With Loan Sales and Securitization

Filters

State chartered banks be members of the Federal Reserve System and nationally chartered banks be members of the Federal Reserve System.

About of federally insured banks are nationally chartered and about of federally insured banks are members of the Federal Reserve.

Bank assets tend to have _ maturities and _ liquidity than/as bank liabilities.