Question 1

Bank loans from the Federal Reserve are called ________ and represent a ________ of funds.

Accepted Answer

A) discount loans; use 
B) discount loans; source 
C) fed funds; use 
D) fed funds; source 
A) discount loans; use 
B) discount loans; source 
C) fed funds; use 
D) fed funds; source

Question 2

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) Borrowings 
C) U)S. Treasury securities 
D) Reserves 
A) Cash items in the process of collection 
B) Borrowings 
C) U)S. Treasury securities 
D) Reserves

Question 3

A bank failure is more likely to occur when

Accepted Answer

A) a bank holds less in U.S. government securities. 
B) a bank suffers large deposit outflows. 
C) a bank holds less equity capital. 
D) all of the above occur. 
E) only A and B of the above occur. 
A) a bank holds less in U.S. government securities. 
B) a bank suffers large deposit outflows. 
C) a bank holds less equity capital. 
D) all of the above occur. 
E) only A and B of the above occur.

Question 4

Nontransaction deposits are the primary source of bank funds.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Bankers' concern regarding the optimal mix of excess reserves, secondary reserves, borrowings from the Fed, and borrowings from other banks to deal with deposit outflows is an example of

Accepted Answer

A) liability management. 
B) liquidity management. 
C) managing interest-rate risk. 
D) none of the above. 
A) liability management. 
B) liquidity management. 
C) managing interest-rate risk. 
D) none of the above.

Question 7

Net profit after taxes per dollar of equity capital is a basic measure of bank profitability called

Accepted Answer

A) return on assets. 
B) return after taxes. 
C) return on equity. 
D) equity multiplier. 
A) return on assets. 
B) return after taxes. 
C) return on equity. 
D) equity multiplier.

Question 8

On a bank's income statement, the amount available to keep as retained earnings or pay to the stockholders in dividends is the bank's

Accepted Answer

A) net income. 
B) net operating income. 
C) net extraordinary items. 
D) net interest margin. 
A) net income. 
B) net operating income. 
C) net extraordinary items. 
D) net interest margin.

Question 9

A bank fails when the value of its ________ falls below the value of ________, causing the bank to become insolvent.

Accepted Answer

A) reserves; required reserves 
B) loans; secondary reserves 
C) securities; deposit liabilities 
D) assets; liabilities 
A) reserves; required reserves 
B) loans; secondary reserves 
C) securities; deposit liabilities 
D) assets; liabilities

Question 10

Explain how a capital crunch can lead to a credit crunch in our economy.

Accepted Answer

The answer of Explain how a capital crunch can lead...

Question 11

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 12

The value-at-risk method for estimating a bank's risk exposure measures the losses a bank could incur under a worst-case scenario.

Accepted Answer

A) True 
 B)False

Question 13

A loan commitment is an agreement to provide a loan up to a certain dollar amount if a customer requests the loan during a specific time period.

Accepted Answer

A) True 
 B)False

Question 14

For a given return on assets, the lower the bank capital is,

Accepted Answer

A) the lower the return for the owners of the bank will be. 
B) the higher the return for the owners of the bank will be. 
C) the lower the credit risk for the owners of the bank will be. 
D) both A and C of the above will happen. 
A) the lower the return for the owners of the bank will be. 
B) the higher the return for the owners of the bank will be. 
C) the lower the credit risk for the owners of the bank will be. 
D) both A and C of the above will happen.

Question 15

In general, banks make profits by selling ________ liabilities and buying ________ assets.

Accepted Answer

A) long-term; shorter-term 
B) short-term; longer-term 
C) illiquid; liquid 
D) risky; risk-free 
A) long-term; shorter-term 
B) short-term; longer-term 
C) illiquid; liquid 
D) risky; risk-free

Question 16

When a bank sells all or part of the cash stream from a specific loan,

Accepted Answer

A) it removes the loan from its balance sheet. 
B) it usually does so at a loss. 
C) it usually does so at a profit. 
D) both A and B of the above occur. 
E) both A and C of the above occur. 
A) it removes the loan from its balance sheet. 
B) it usually does so at a loss. 
C) it usually does so at a profit. 
D) both A and B of the above occur. 
E) both A and C of the above occur.

Question 17

Which of the following are checkable deposits?

Accepted Answer

A) savings accounts 
B) small-denomination time deposits 
C) negotiable order of withdrawal accounts 
D) certificates of deposit 
A) savings accounts 
B) small-denomination time deposits 
C) negotiable order of withdrawal accounts 
D) certificates of deposit

Question 18

What are a bank's major sources and uses of funds?

Accepted Answer

Banks operate by balancing their sources

Question 19

Banks earn profits by selling ________ with attractive combinations of liquidity, risk, and return, and using the proceeds to buy ________ with a different set of characteristics.

Accepted Answer

A) loans; deposits 
B) securities; deposits 
C) liabilities; assets 
D) assets; liabilities 
A) loans; deposits 
B) securities; deposits 
C) liabilities; assets 
D) assets; liabilities

Question 20

Which of the following bank assets are the most liquid?

Accepted Answer

A) consumer loans 
B) reserves 
C) cash items in process of collection 
D) U)S. government securities 
A) consumer loans 
B) reserves 
C) cash items in process of collection 
D) U)S. government securities

Exam 17: Banking and the Management of Financial Institutions

Bank loans from the Federal Reserve are called ________ and represent a ________ of funds.

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

A bank failure is more likely to occur when

Nontransaction deposits are the primary source of bank funds.

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

Bankers' concern regarding the optimal mix of excess reserves, secondary reserves, borrowings from the Fed, and borrowings from other banks to deal with deposit outflows is an example of

Net profit after taxes per dollar of equity capital is a basic measure of bank profitability called

On a bank's income statement, the amount available to keep as retained earnings or pay to the stockholders in dividends is the bank's

A bank fails when the value of its ________ falls below the value of ________, causing the bank to become insolvent.

Explain how a capital crunch can lead to a credit crunch in our economy.

Checkable deposits and money market deposit accounts are

The value-at-risk method for estimating a bank's risk exposure measures the losses a bank could incur under a worst-case scenario.

A loan commitment is an agreement to provide a loan up to a certain dollar amount if a customer requests the loan during a specific time period.

For a given return on assets, the lower the bank capital is,

In general, banks make profits by selling ________ liabilities and buying ________ assets.

When a bank sells all or part of the cash stream from a specific loan,

Which of the following are checkable deposits?

What are a bank's major sources and uses of funds?

Banks earn profits by selling ________ with attractive combinations of liquidity, risk, and return, and using the proceeds to buy ________ with a different set of characteristics.

Which of the following bank assets are the most liquid?

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 Why Are They so Damaging to the Economy

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

Savings Associations and Credit Unions

Finance Companies

Filters

Bank loans from the Federal Reserve are called and represent a of funds.

A bank fails when the value of its falls below the value of , causing the bank to become insolvent.

In general, banks make profits by selling liabilities and buying assets.

Banks earn profits by selling with attractive combinations of liquidity, risk, and return, and using the proceeds to buy with a different set of characteristics.