Exam 12: Depository Institutions: Banks and Bank Management

As the end of the year 1999 approached, many people worried that banks and more specifically the banks' computers would not be able to read the year 2000 correctly.This was commonly known as the Y2K problem.Many people were concerned that their bank would lose the record of their deposits etc., and made plans to take most of their funds out of the bank.Address the potential Y2K problem from the standpoint of bank risk.What two types of risk potentially could have been involved?

A non-transaction deposit would include each of the following, except:

You are provided with the following information: a bank has a net income after taxes of $3.5 million; it has assets of $150 million; and bank capital of $12.5 million.What is the bank's return on assets; its return on equity, and its debt-to-equity ratio?

One way for a bank to deal with credit risk is to:

Which of the following statements best completes this sentence: "On a bank's balance sheet¼."?

If the Federal Reserve were to do away with the required reserve regulation, do you think banks would stop holding reserves? Explain.

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

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.

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

Many Japanese banks are reporting net worth much greater than actual due to the fact that:

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

The tendency for large banks to have a higher return on equity than small banks suggests:

A bank's net worth is synonymous with it's:

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?

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

Commercial banks differ from credit unions in the following way:

Which of the following is not a bank asset?

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

Commercial banks increased their involvement in mortgages over the years due to:

The largest liability for commercial banks in the U.S.is: