Question 1

The label "commercial" means that banks devote a substantial portion of their resources to meeting the financial needs of business firms.

Accepted Answer

A) True 
 B)False

Question 2

A bank chartered by the federal government in the United States is known as a:

Accepted Answer

A)  Universal bank 
B)  Merchant bank 
C)  Member bank 
D)  National bank 
E)  None of the above

Question 3

Super NOW accounts may be offered only to business firms.

Accepted Answer

A) True 
 B)False

Question 4

A money-dispensing machine which is located away from the bank's main office in retail stores and shopping centers and is designed to reduce the need for conventional branch offices is known as a/an:

Accepted Answer

A)  RSU 
B)  ATM 
C)  POS 
D)  ACH 
E)  None of the above

Question 5

The failure rate in the U.S. banking industry increase dramatically during the credit crisis of 2007-2009.

Accepted Answer

A) True 
 B)False

Question 6

The Graham Leach Bliley Act of 1999 allowed the creation of:

Accepted Answer

A)  Bank holding companies 
B)  Financial services holding companies 
C)  Commercial banks 
D)  Savings and loan associations 
E)  None of the above

Question 7

The principal means of making payments in the U.S. economy is:

Accepted Answer

A)  Check 
B)  Cash 
C)  Credit card 
D)  Debit card 
E)  None of the above

Question 8

The number one expense item for U.S. commercial banks is:

Accepted Answer

A)  Wages and salaries of employees 
B)  Interest on deposits 
C)  Interest paid on nondeposit borrowings 
D)  Federal income taxes 
E)  None of the above

Question 9

Which of the following reasons account for the recent increase in the failure of U.S. banks?

Accepted Answer

A)  Willingness of bankers to accept greater risk in their operations 
B)  Increased volatility of economic and financial conditions 
C)  Leniency in the interpretation and enforcement of regulations 
D)  All of the above 
E)  None of the above

Question 10

A bank's pledge to pay a third party if its customer who borrowed from that third party cannot repay his or her loan is known as a:

Accepted Answer

A)  Contingent loan trust 
B)  Securitized loan 
C)  Standby credit letter 
D)  Collateralized loan agreement 
E)  None of the above

Question 11

One of the advantages of standby credit letters is that they generate fee income without using up scarce bank funds.

Accepted Answer

A) True 
 B)False

Question 12

During the last 25 years the number of U.S. commercial banks has dropped from about 14,000 to less than:

Accepted Answer

A)  11,000 
B)  10,500 
C)  7,500 
D)  4,000 
E)  None of the above

Question 13

Major banks have been shifting more of their activities on to their balance sheets.

Accepted Answer

A) True 
 B)False

Question 14

Greater use of computers and electronic machines for transferring financial information will make banking more labor intensive.

Accepted Answer

A) True 
 B)False

Question 15

Loans are attractive to banks because of their high yield.

Accepted Answer

A) True 
 B)False

Question 16

Regulations effective in the United States December 31, 2006 require bankers to develop more sophisticated account access procedures in order to protect their online customers, which include randomly asking a customer one or more personal questions, the use of tokens to randomize account passwords or they use of a customer's physical characteristics such as a retinal scan.

Accepted Answer

A) True 
 B)False

Question 17

A banking facility abroad that offers all or most of the services the home office provides, including the taking of deposits and the booking of loans, is a/an:

Accepted Answer

A)  Representative office 
B)  Joint Venture 
C)  Branch office 
D)  Edge Act 
E)  None of the above

Question 18

The road to complete European economic and financial unity will not be an easy journey because:

Accepted Answer

A)  Differences in national economies, concern over unemployment and the welfare needs of citizens and strong feelings of national identity and independence pose major problems for the newly formed European Union of 11 nations 
B)  Unlike the United States, the new union currently has no common fiscal policy that can redistribute income and productive resources out of economically robust areas toward economically depressed areas 
C)  Both of the above 
D)  None of the above

Question 19

Loans are typically the highest-return assets on a bank's balance sheet. If this is so, then why do banks sell these loans in a process called securitization?

Accepted Answer

A)  Banks only sell the loans they think are uncollectible 
B)  Investors are willing to pay more for the loans than the bank can earn 
C)  The Federal Reserve requires banks to raise equity in this manner 
D)  Banks raise reinvestible funds and generate fee income from origination and servicing of these loans 
E)  None of the above

Question 20

Suppose that the banking system receives an injection of new reserves amounting to $100,000 in new checkbook (demand deposit) funds which carry a legal reserve requirement of 15 percent. Moreover, banks belonging to the system typically set aside an additional 3 percent in cash reserves to cover any unexpected deposit withdrawals or unanticipated loan demand. With this newly added amount of $100,000 in legal reserves (and assuming no leakages from the banking system and that all new loanable funds are kept in checkable deposits) what total volume of new deposits and new loans will the banking system as a whole eventually generate as funds pass from bank to bank in the system?

Accepted Answer

The answer of Suppose that the banking system receives an...

Exam 14: Banking and Financial Services: Regulations, Operations, and Trends

The label "commercial" means that banks devote a substantial portion of their resources to meeting the financial needs of business firms.

A bank chartered by the federal government in the United States is known as a:

Super NOW accounts may be offered only to business firms.

A money-dispensing machine which is located away from the bank's main office in retail stores and shopping centers and is designed to reduce the need for conventional branch offices is known as a/an:

The failure rate in the U.S. banking industry increase dramatically during the credit crisis of 2007-2009.

The Graham Leach Bliley Act of 1999 allowed the creation of:

The principal means of making payments in the U.S. economy is:

The number one expense item for U.S. commercial banks is:

Which of the following reasons account for the recent increase in the failure of U.S. banks?

A bank's pledge to pay a third party if its customer who borrowed from that third party cannot repay his or her loan is known as a:

One of the advantages of standby credit letters is that they generate fee income without using up scarce bank funds.

During the last 25 years the number of U.S. commercial banks has dropped from about 14,000 to less than:

Major banks have been shifting more of their activities on to their balance sheets.

Greater use of computers and electronic machines for transferring financial information will make banking more labor intensive.

Loans are attractive to banks because of their high yield.

A banking facility abroad that offers all or most of the services the home office provides, including the taking of deposits and the booking of loans, is a/an:

The road to complete European economic and financial unity will not be an easy journey because:

Loans are typically the highest-return assets on a bank's balance sheet. If this is so, then why do banks sell these loans in a process called securitization?