Question 1

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 2

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

Accepted Answer

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

Question 3

Holding all else constant, when a bank receives the funds for a deposited check,

Accepted Answer

A) cash items in process of collection fall by the amount of the check. 
B) bank assets remain unchanged. 
C) bank liabilities decrease by the amount of the check. 
D) all of the above occur. 
E) only A and B of the above occur. 
A) cash items in process of collection fall by the amount of the check. 
B) bank assets remain unchanged. 
C) bank liabilities decrease by the amount of the check. 
D) all of the above occur. 
E) only A and B of the above occur.

Question 4

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

The answer of What is the major focus of each...

Question 5

Which of the following statements is true?

Accepted Answer

A) A bank's assets are its uses of funds. 
B) A bank's assets are its sources of funds. 
C) A bank's liabilities are its uses of funds. 
D) Only B and C of the above are true. 
A) A bank's assets are its uses of funds. 
B) A bank's assets are its sources of funds. 
C) A bank's liabilities are its uses of funds. 
D) Only B and C of the above are true.

Question 6

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 7

Which of the following do banks hold as insurance against the high cost of deposit outflows?

Accepted Answer

A) excess reserves 
B) secondary reserves 
C) bank equity capital 
D) all of the above 
E) only A and B of the above 
A) excess reserves 
B) secondary reserves 
C) bank equity capital 
D) all of the above 
E) only A and B of the above

Question 8

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

Accepted Answer

A) discount loans from the Fed 
B) loans 
C) borrowings 
D) only A and B of the above 
A) discount loans from the Fed 
B) loans 
C) borrowings 
D) only A and B of the above

Question 9

Off-balance-sheet activities consist of trading financial instruments and generating income from fees and loan sales, all of which affect bank profits but are not visible on bank balance sheets.

Accepted Answer

A) True 
 B)False

Question 10

The most important category of assets on a bank's balance sheet is

Accepted Answer

A) discount loans. 
B) securities. 
C) loans. 
D) cash items in the process of collection. 
A) discount loans. 
B) securities. 
C) loans. 
D) cash items in the process of collection.

Question 11

Which of the following are 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) checkable deposits 
D) bank capital 
E) only A and B of the above 
A) cash items in the process of collection 
B) deposits with other banks 
C) checkable deposits 
D) bank capital 
E) only A and B of the above

Question 12

Which of the following are primary concerns of a bank manager?

Accepted Answer

A) maintaining sufficient reserves to minimize the cost to the bank of deposit outflows 
B) extending loans to borrowers who will pay high interest rates, but who are also good credit risks 
C) acquiring funds at a relatively low cost, so that profitable lending opportunities can be realized 
D) all of the above 
A) maintaining sufficient reserves to minimize the cost to the bank of deposit outflows 
B) extending loans to borrowers who will pay high interest rates, but who are also good credit risks 
C) acquiring funds at a relatively low cost, so that profitable lending opportunities can be realized 
D) all of the above

Question 13

Deposits that banks keep in accounts at the Federal Reserve less vault cash is called reserves.

Accepted Answer

A) True 
 B)False

Question 14

In recent years, the interest paid on checkable and time deposits has accounted for around ________ of total bank operating expenses, while the costs involved in running the bank have been approximately ________ of total operating expenses.

Accepted Answer

A) 50%; 50% 
B) 50%; 25% 
C) 30%; 50% 
D) 25%; 75% 
A) 50%; 50% 
B) 50%; 25% 
C) 30%; 50% 
D) 25%; 75%

Question 15

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

Accepted Answer

Banks operate by balancing their sources

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

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 18

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

Accepted Answer

A) the liabilities of the First National Bank decrease by $10. 
B) the reserves of the First National Bank increase by $10. 
C) the liabilities of the Second National Bank decrease by $10. 
D) the assets of Second National Bank decrease by $10. 
A) the liabilities of the First National Bank decrease by $10. 
B) the reserves of the First National Bank increase by $10. 
C) the liabilities of the Second National Bank decrease by $10. 
D) the assets of Second National Bank decrease by $10.

Question 19

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 20

Nontransaction deposits are the primary source of bank funds.

Accepted Answer

A) True 
 B)False

Exam 17: Banking and the Management of Financial Institutions

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

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

Holding all else constant, when a bank receives the funds for a deposited check,

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

Which of the following statements is true?

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

Which of the following do banks hold as insurance against the high cost of deposit outflows?

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

Off-balance-sheet activities consist of trading financial instruments and generating income from fees and loan sales, all of which affect bank profits but are not visible on bank balance sheets.

The most important category of assets on a bank's balance sheet is

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

Which of the following are primary concerns of a bank manager?

Deposits that banks keep in accounts at the Federal Reserve less vault cash is called reserves.

In recent years, the interest paid on checkable and time deposits has accounted for around ________ of total bank operating expenses, while the costs involved in running the bank have been approximately ________ of total operating expenses.

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

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

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

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

A bank

Nontransaction deposits are the primary source of bank funds.

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.

In recent years, the interest paid on checkable and time deposits has accounted for around of total bank operating expenses, while the costs involved in running the bank have been approximately of total operating expenses.

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