Question 1

Loan loss reserves are an asset on a bank's balance sheet.

Accepted Answer

A) True 
 B)False

Question 2

Checkable deposits and money market deposit accounts are

Accepted Answer

A)  payable on demand. 
B)  liabilities of the banks. 
C)  assets of the banks. 
D)  only A and B of the above. 
E)  only A and C of the above. 
A)  payable on demand. 
B)  liabilities of the banks. 
C)  assets of the banks. 
D)  only A and B of the above. 
E)  only A and C of the above.

Question 3

A bank

Accepted Answer

A)  obtains funds by borrowing and by issuing liabilities. 
B)  makes profits by charging an interest rate on their asset holdings of securities and loans that is lower than the interest and other expenses on their liabilities. 
C)  does both A and B of the above. 
D)  does neither A nor B of the above. 
A)  obtains funds by borrowing and by issuing liabilities. 
B)  makes profits by charging an interest rate on their asset holdings of securities and loans that is lower than the interest and other expenses on their liabilities. 
C)  does both A and B of the above. 
D)  does neither A nor B of the above.

Question 4

Which of the following bank assets are the least liquid?

Accepted Answer

A)  Reserves 
B)  Mortgage loans 
C)  Cash items in process of collection 
D)  Deposits with other banks 
A)  Reserves 
B)  Mortgage loans 
C)  Cash items in process of collection 
D)  Deposits with other banks

Question 5

Owners cannot write checks on nontransaction deposits,but the interest rate paid on these deposits are usually higher than those on checkable deposits.

Accepted Answer

A) True 
 B)False

Question 6

________ were once the most common type of nontransaction deposit.

Accepted Answer

A)  Checking accounts 
B)  Time deposits 
C)  Savings accounts 
D)  none of the above 
A)  Checking accounts 
B)  Time deposits 
C)  Savings accounts 
D)  none of the above

Question 7

Given a bank's return on assets,the higher the bank capital,the higher the return for the owners of the bank.

Accepted Answer

A) True 
 B)False

Question 8

A bank's balance sheet

Accepted Answer

A)  shows that total assets equal total liabilities plus equity capital. 
B)  lists sources and uses of bank funds. 
C)  indicates whether or not the bank is profitable. 
D)  does all of the above. 
E)  does only A and B of the above. 
A)  shows that total assets equal total liabilities plus equity capital. 
B)  lists sources and uses of bank funds. 
C)  indicates whether or not the bank is profitable. 
D)  does all of the above. 
E)  does only A and B of the above.

Question 9

What is the major focus of each of the following bank management concerns: asset management,liability management,liquidity management,and capital adequacy management?

Accepted Answer

Asset management refers to a banking str

Question 10

The amount of assets per dollar of equity capital is called the

Accepted Answer

A)  asset ratio. 
B)  equity ratio. 
C)  equity multiplier. 
D)  asset multiplier. 
E)  return on equity. 
A)  asset ratio. 
B)  equity ratio. 
C)  equity multiplier. 
D)  asset multiplier. 
E)  return on equity.

Question 11

A bank maintains bank capital to lessen the chance that it will become insolvent.

Accepted Answer

A) True 
 B)False

Question 12

When you deposit $50 in the First National Bank,

Accepted Answer

A)  its liabilities decrease by $50. 
B)  its assets increase by $50. 
C)  its reserves increase by $50. 
D)  only B and C of the above occur. 
A)  its liabilities decrease by $50. 
B)  its assets increase by $50. 
C)  its reserves increase by $50. 
D)  only B and C of the above occur.

Question 13

Since their introduction in 1961,negotiable CDs have become an important source of bank funds.

Accepted Answer

A) True 
 B)False

Question 14

In the absence of regulation,banks would probably hold

Accepted Answer

A)  too much capital, reducing the efficiency of the payments system. 
B)  too much capital, reducing the profitability of banks. 
C)  too little capital, increasing the return on equity. 
D)  none of the above. 
A)  too much capital, reducing the efficiency of the payments system. 
B)  too much capital, reducing the profitability of banks. 
C)  too little capital, increasing the return on equity. 
D)  none of the above.

Question 15

Which of the following are not reported as assets on a bank's balance sheet?

Accepted Answer

A)  Cash items in the process of collection 
B)  Deposits with other banks 
C)  U.S. Treasury securities 
D)  Checkable deposits 
A)  Cash items in the process of collection 
B)  Deposits with other banks 
C)  U.S. Treasury securities 
D)  Checkable deposits

Question 16

If a bank has $1 million of deposits,a required reserve ratio of 20 percent,and $300,000 in reserves,it need not rearrange its balance sheet if there is a deposit outflow of

Accepted Answer

A)  $50,000. 
B)  $75,000. 
C)  $150,000. 
D)  either A or B of the above. 
A)  $50,000. 
B)  $75,000. 
C)  $150,000. 
D)  either A or B of the above.

Question 17

Loans

Accepted Answer

A)  are the largest category of bank assets. 
B)  provide most of the bank's revenues. 
C)  earn the highest return of all bank assets. 
D)  do all of the above. 
E)  are only A and B of the above. 
A)  are the largest category of bank assets. 
B)  provide most of the bank's revenues. 
C)  earn the highest return of all bank assets. 
D)  do all of the above. 
E)  are only A and B of the above.

Question 18

In 2009 provisions for loan losses reached a new peak of ________ of total operating expenses.

Accepted Answer

A)  60% 
B)  50% 
C)  33% 
D)  13% 
A)  60% 
B)  50% 
C)  33% 
D)  13%

Question 19

A bank can reduce its total amount of loans outstanding by

Accepted Answer

A)  "calling in" loans; that is, by not renewing some loans when they come due. 
B)  selling loans to other banks. 
C)  selling loans to the Federal Reserve. 
D)  doing all of the above. 
E)  doing only A and B of the above. 
A)  "calling in" loans; that is, by not renewing some loans when they come due. 
B)  selling loans to other banks. 
C)  selling loans to the Federal Reserve. 
D)  doing all of the above. 
E)  doing only A and B of the above.

Question 20

Because checking accounts are ________ liquid for the depositor than passbook savings,they earn ________ interest rates.

Accepted Answer

A)  less; higher 
B)  less; lower 
C)  more; higher 
D)  more; lower 
A)  less; higher 
B)  less; lower 
C)  more; higher 
D)  more; lower

Exam 17: Banking and the Management of Financial Institutions

Loan loss reserves are an asset on a bank's balance sheet.

Checkable deposits and money market deposit accounts are

A bank

Which of the following bank assets are the least liquid?

Owners cannot write checks on nontransaction deposits,but the interest rate paid on these deposits are usually higher than those on checkable deposits.

________ were once the most common type of nontransaction deposit.

Given a bank's return on assets,the higher the bank capital,the higher the return for the owners of the bank.

A bank's balance sheet

What is the major focus of each of the following bank management concerns: asset management,liability management,liquidity management,and capital adequacy management?

The amount of assets per dollar of equity capital is called the

A bank maintains bank capital to lessen the chance that it will become insolvent.

When you deposit $50 in the First National Bank,

Since their introduction in 1961,negotiable CDs have become an important source of bank funds.

In the absence of regulation,banks would probably hold

Which of the following are not reported as assets on a bank's balance sheet?

If a bank has $1 million of deposits,a required reserve ratio of 20 percent,and $300,000 in reserves,it need not rearrange its balance sheet if there is a deposit outflow of

Loans

In 2009 provisions for loan losses reached a new peak of ________ of total operating expenses.

A bank can reduce its total amount of loans outstanding by

Because checking accounts are ________ liquid for the depositor than passbook savings,they earn ________ interest rates.

Why Study Financial Markets and Institutions?

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation?

Why Do Interest Rates Change?

How Do Risk and Term Structure Affect Interest Rates?

Are Financial Markets Efficient?

Why Do Financial Institutions Exist?

Why Do Financial Crises Occur and

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Financial Regulation

Banking Industry: Structure and Competition

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging with Financial Derivatives

Financial Crises In Emerging Market Economies

Savings Associations and Credit Unions

Finance Companies

Filters

Because checking accounts are liquid for the depositor than passbook savings,they earn interest rates.