Question 1

Small banks control about 70 percent of banking industry assets.

Accepted Answer

A) True 
 B)False

Question 2

On average,bank liabilities tend to have shorter maturities and greater liquidity than bank assets.

Accepted Answer

A) True 
 B)False

Question 3

Why are loans such a high percentage of total assets at the typical bank? What four broad classes of loans do banks engage in?

Accepted Answer

Loans are the highest earning asset on t

Question 4

Most of the changes in size,structure,and composition of the banking industry in recent years are due to

Accepted Answer

A) bank failures. 
B) increasing regulations. 
C) new charters granted. 
D) declines in the number of branch offices. 
E) mergers and acquisitions. 
A) bank failures. 
B) increasing regulations. 
C) new charters granted. 
D) declines in the number of branch offices. 
E) mergers and acquisitions.

Question 5

Off-balance-sheet activities consist of issuing financial instruments such as various types of guarantees and engaging in derivative trading to generate additional revenue.

Accepted Answer

A) True 
 B)False

Question 6

Bank assets tend to have ________ maturities and ________ liquidity than/as bank liabilities.

Accepted Answer

A) longer; greater 
B) longer; lower 
C) shorter; greater 
D) shorter; lower 
E) equal; equal 
A) longer; greater 
B) longer; lower 
C) shorter; greater 
D) shorter; lower 
E) equal; equal

Question 7

Loans comprise the single largest asset category for a bank.

Accepted Answer

A) True 
 B)False

Question 8

About ________ of federally insured banks are nationally chartered and about ________ of federally insured banks are members of the Federal Reserve.

Accepted Answer

A) 77 percent; 65 percent 
B) 65 percent; 77 percent 
C) 34 percent; 22 percent 
D) 19 percent; 34 percent 
E) 40 percent; 60 percent 
A) 77 percent; 65 percent 
B) 65 percent; 77 percent 
C) 34 percent; 22 percent 
D) 19 percent; 34 percent 
E) 40 percent; 60 percent

Question 9

Banks differ from other types of depository institutions in that
I. banks have more diversified asset portfolios.
II. banks obtain funds from more different types of sources.
III. the average size bank is larger than other depository institutions.

Accepted Answer

A) I only 
B) I and II only 
C) I and III only 
D) II and III only 
E) I,II,and III 
A) I only 
B) I and II only 
C) I and III only 
D) II and III only 
E) I,II,and III

Question 10

In comparison to small banks,larger banks typically have

Accepted Answer

A) more equity capital. 
B) more core deposits. 
C) more off-balance-sheet activities. 
D) larger net interest margins. 
E) All of these choices are correct. 
A) more equity capital. 
B) more core deposits. 
C) more off-balance-sheet activities. 
D) larger net interest margins. 
E) All of these choices are correct.

Question 11

Why did bank profitability decline beginning in late 2006 and through 2008?

Accepted Answer

Increased loan loss provisions,reduced s

Question 12

The provision of banking services to other banks,such as check clearing,foreign exchange trading,and so forth,is an example of

Accepted Answer

A) correspondent banking. 
B) trust services. 
C) off-balance-sheet assets. 
D) economies of scope. 
E) credit derivatives. 
A) correspondent banking. 
B) trust services. 
C) off-balance-sheet assets. 
D) economies of scope. 
E) credit derivatives.

Question 13

What are the major sources of funds for banks? Provide a breakdown of all the major sources of funds at a bank and briefly describe the different types of deposits/nondeposit sources.

Accepted Answer

-Equity: Common stock,paid-in capital,an

Question 14

The majority of banks are nationally chartered and insured by the FDIC.

Accepted Answer

A) True 
 B)False

Question 15

The financial crisis of 2008,demonstrated that activities such as trading in financial futures and interest-rate swaps have low risk.

Accepted Answer

A) True 
 B)False

Question 16

A contingent promise by a bank to pay a bill when it comes due if the bill's originator fails to pay is an example of a

Accepted Answer

A) swap agreement. 
B) standby letters of credit. 
C) forward contract. 
D) loan commitment. 
E) commitment to buy foreign exchange. 
A) swap agreement. 
B) standby letters of credit. 
C) forward contract. 
D) loan commitment. 
E) commitment to buy foreign exchange.

Question 17

A bank's balance sheet equates the value of total assets to the sum of total liabilities and equity capital.

Accepted Answer

A) True 
 B)False

Question 18

Reasons behind the drop in bank profitability in the second half of this decade include
I. flattening of the yield curve.
II. increase in competitive pressures on asset pricing.
III. increases in foreclosures in the mortgage market.
IV. increases in net interest margin.

Accepted Answer

A) I only 
B) II and III only 
C) I,II,and III only 
D) II,III,and IV only 
E) III and IV only 
A) I only 
B) II and III only 
C) I,II,and III only 
D) II,III,and IV only 
E) III and IV only

Question 19

Loans past due 90 days or more and loans that are not accruing interest because of problems of the borrower are called

Accepted Answer

A) loan losses. 
B) net charge-offs. 
C) provisional loans. 
D) noncurrent loans. 
E) contra loans. 
A) loan losses. 
B) net charge-offs. 
C) provisional loans. 
D) noncurrent loans. 
E) contra loans.

Question 20

An example of off balance sheet activity includes:

Accepted Answer

A) lending money to a depositor. 
B) borrowing from another bank. 
C) borrowing from the Federal Reserve. 
D) purchasing a futures contract. 
E) All of these choices are correct. 
A) lending money to a depositor. 
B) borrowing from another bank. 
C) borrowing from the Federal Reserve. 
D) purchasing a futures contract. 
E) All of these choices are correct.

Exam 11: Commercial Banks: Industry Overview

Small banks control about 70 percent of banking industry assets.

On average,bank liabilities tend to have shorter maturities and greater liquidity than bank assets.

Why are loans such a high percentage of total assets at the typical bank? What four broad classes of loans do banks engage in?

Most of the changes in size,structure,and composition of the banking industry in recent years are due to

Off-balance-sheet activities consist of issuing financial instruments such as various types of guarantees and engaging in derivative trading to generate additional revenue.

Bank assets tend to have ________ maturities and ________ liquidity than/as bank liabilities.

Loans comprise the single largest asset category for a bank.

About ________ of federally insured banks are nationally chartered and about ________ of federally insured banks are members of the Federal Reserve.

Banks differ from other types of depository institutions in that I. banks have more diversified asset portfolios. II. banks obtain funds from more different types of sources. III. the average size bank is larger than other depository institutions.

In comparison to small banks,larger banks typically have

Why did bank profitability decline beginning in late 2006 and through 2008?

The provision of banking services to other banks,such as check clearing,foreign exchange trading,and so forth,is an example of

What are the major sources of funds for banks? Provide a breakdown of all the major sources of funds at a bank and briefly describe the different types of deposits/nondeposit sources.

The majority of banks are nationally chartered and insured by the FDIC.

The financial crisis of 2008,demonstrated that activities such as trading in financial futures and interest-rate swaps have low risk.

A contingent promise by a bank to pay a bill when it comes due if the bill's originator fails to pay is an example of a

A bank's balance sheet equates the value of total assets to the sum of total liabilities and equity capital.

Reasons behind the drop in bank profitability in the second half of this decade include I. flattening of the yield curve. II. increase in competitive pressures on asset pricing. III. increases in foreclosures in the mortgage market. IV. increases in net interest margin.

Loans past due 90 days or more and loans that are not accruing interest because of problems of the borrower are called

An example of off balance sheet activity includes:

Introduction

Determinants of Interest Rates

Interest Rates and Security Valuation

The Federal Reserve System, monetary Policy, and Interest Rates

Money Markets

Bond Markets

Mortgage Markets

Stock Markets

Foreign Exchange Markets

Derivative Securities Markets

Commercial Banks Financial Statements and Analysis

Regulation of Commercial Banks

Other Lending Institutions: Savings Institutions, credit Unions, and Finance Companies

Insurance Companies

Securities Firms and Investment Banks

Investment Companies

Pension Funds

Types of Risks Incurred by Financial Institutions

Managing Credit Risk on the Balance Sheet

Managing Liquidity Risk on the Balance Sheet

Managing Interest Rate Risk and Insolvency Risk on the Balance Sheet

Managing Risk Off the Balance Sheet With Derivative Securities

Managing Risk Off the Balance Sheet With Loan Sales and Securitization

Filters

Bank assets tend to have maturities and liquidity than/as bank liabilities.

About of federally insured banks are nationally chartered and about of federally insured banks are members of the Federal Reserve.