Exam 17: Banking and the Management of Financial Institutions

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

When a $10 check written on the First National Bank is deposited in an account at the Second National Bank, then

When $1 million is deposited at a bank, the required reserve ratio is 20 percent, and the bank chooses not to hold any excess reserves but instead makes loans, then in the bank's final balance sheet,

Discount loans are also known as ________.

When you deposit $50 in the First National Bank,

Which of the following is checkable deposits?

The share of bank operating income earned from off-balance-sheet activities has increased over the past two decades.

If a bank has $100,000 of deposits, a required reserve ratio of 20 percent, and $40,000 in reserves, then the maximum deposit outflow it can sustain without altering its balance sheet is

When a bank receives additional deposits, it gains an equal amount of reserves; when it loses deposits, it loses an equal amount of reserves.

When you deposit $50 in the First National Bank,

Which of the following are reported as liabilities on a bank's balance sheet?

Distinguish between a bank's reserves, required reserves, excess reserves, and secondary reserves.

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

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

Banks can protect themselves from the disruption caused by deposit outflows by

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

Which is the least costly way for a bank to handle deposit outflows?

When you deposit $50 in currency at the Old National Bank,

Bank capital

Since a bank's assets exceed its equity capital, the return on assets always exceeds the return on equity.