Question 1

Accommodating banks buy and sell Federal funds simultaneously to make a market for the reserves of its customer institutions.

Accepted Answer

A) True 
 B)False

Question 2

Although there is an active federal funds spot market,there is currently no associated futures market for federal funds.

Accepted Answer

A) True 
 B)False

Question 3

Suppose a bank promises an annual return of 6.5 percent on a three month (90-day $150,000 CD),what will be the total amount due to the customer at the end of the three month period?

Accepted Answer

A) $152,437.50 
B) $2,437.50 
C) $150,000 
D) $152,404.11 
E) None of the options is correct

Question 4

Which of the following is an example of a longer-term nondeposit funding source?

Accepted Answer

A) Money market funds 
B) Repurchase agreements 
C) Capital notes and debentures 
D) Negotiable CDs 
E) None of the options is correct

Question 5

Federal Reserve balances of banks can be transferred from one institution to another in seconds through the Fed's wire transfer network called the ______________________.

Accepted Answer

The answer of Federal Reserve balances of banks can be...

Question 6

A Fed Funds loan that is an unwritten agreement,negotiated via wire or telephone,and with the borrowed funds returned the next day is known as a(n):

Accepted Answer

A) overnight loan. 
B) continuing contract. 
C) term loan. 
D) daytime loan. 
E) None of the options is correct.

Question 7

When financial institution borrows in the RP market,this loan is listed as _________________________ under agreements to repurchase.

Accepted Answer

The answer of When financial institution borrows in the RP...

Question 8

A repurchase agreement (RP)whereby the collateral is specifically identified is known as a conventional or ____________ RP.

Accepted Answer

The answer of A repurchase agreement (RP)whereby the collateral is...

Question 9

A bank plans on borrowing $225 million for 10 days through an RP transaction collateralized by T-Bills.The current RP rate is 4.5 percent.What is the bank's total interest cost in dollars?

Accepted Answer

A) $10,125,000 
B) $1,125,000 
C) $281,250 
D) $28,125 
E) None of the options is correct

Question 10

Only federal regulators can limit the terms (amount,frequency,and use)of borrower funds by the U.S.depository institutions.

Accepted Answer

A) True 
 B)False

Question 11

When the general credit conditions are tight,there is a possibility that not every borrower will be accommodated by lenders.This chance of credit rationing is referred to as credit availability risk.

Accepted Answer

A) True 
 B)False

Question 12

Suppose a bank expects to issue 45-day negotiable CDs for $150 million.The interest rate on these CDs is 6.35 percent.What is the dollar amount in interest the bank will owe on these CDs at the end of the 45-day period?

Accepted Answer

A) $9,525,000 
B) $1,190,625 
C) $76,200,000 
D) $6,750,000 
E) None of the options is correct

Question 13

A(n)_________________________ is an interest bearing receipt for funds issued by a bank with a minimum denomination of $100,000.

Accepted Answer

The answer of A(n)_________________________ is an interest bearing receipt for...

Question 14

The interest rate on a Fed funds loan is:

Accepted Answer

A) decided by the Federal Reserve Board. 
B) based on LIBOR. 
C) decided by the U.S.Treasury Department. 
D) subject to negotiation between the borrower and the lender. 
E) based on Euribor.

Question 15

Seasonal credit discount window loans generally have the highest interest rates.

Accepted Answer

A) True 
 B)False

Question 16

A bank plans on borrowing $450 million for 20 days through a RP transaction collateralized by T-Bills.The current RP rate is 6.25 percent.What is the bank's total interest cost in dollars?

Accepted Answer

A) $28,125,000 
B) $78,125 
C) $1,406,250 
D) $1,562,500 
E) None of the options is correct

Question 17

First National Bank has new loan requests of $175 million,needs to purchase $50 million in U.S.Treasury securities to meet pledging requirements,and anticipates draws against credit lines of $45 million.Deposits received today total $140 million and the bank expects to bring in an additional $230 million next week.What is First National's estimated funds gap for the coming week?

Accepted Answer

A) $225 million. 
B) -$145 million. 
C) $135 million. 
D) -$100 million. 
E) None of the options is correct.

Question 18

Depository institutions hold deposits with the Federal reserve:

Accepted Answer

A) to satisfy legal reserve requirements. 
B) to clear checks. 
C) to pay for purchases of government securities. 
D) for inter-bank lending through Fed's wire system. 
E) All of the options are correct.

Question 19

Federal funds today consist exclusively of deposits held at the Federal Reserve banks.

Accepted Answer

A) True 
 B)False

Question 20

The most common type of Federal funds loans are term loans.

Accepted Answer

A) True 
 B)False

Exam 13: Managing Nondeposit Liabilities

Accommodating banks buy and sell Federal funds simultaneously to make a market for the reserves of its customer institutions.

Although there is an active federal funds spot market,there is currently no associated futures market for federal funds.

Suppose a bank promises an annual return of 6.5 percent on a three month (90-day $150,000 CD) ,what will be the total amount due to the customer at the end of the three month period?

Which of the following is an example of a longer-term nondeposit funding source?

Federal Reserve balances of banks can be transferred from one institution to another in seconds through the Fed's wire transfer network called the ______________________.

A Fed Funds loan that is an unwritten agreement,negotiated via wire or telephone,and with the borrowed funds returned the next day is known as a(n) :

When financial institution borrows in the RP market,this loan is listed as _________________________ under agreements to repurchase.

A repurchase agreement (RP)whereby the collateral is specifically identified is known as a conventional or ____________ RP.

A bank plans on borrowing $225 million for 10 days through an RP transaction collateralized by T-Bills.The current RP rate is 4.5 percent.What is the bank's total interest cost in dollars?

Only federal regulators can limit the terms (amount,frequency,and use)of borrower funds by the U.S.depository institutions.

When the general credit conditions are tight,there is a possibility that not every borrower will be accommodated by lenders.This chance of credit rationing is referred to as credit availability risk.

Suppose a bank expects to issue 45-day negotiable CDs for $150 million.The interest rate on these CDs is 6.35 percent.What is the dollar amount in interest the bank will owe on these CDs at the end of the 45-day period?

A(n)_________________________ is an interest bearing receipt for funds issued by a bank with a minimum denomination of $100,000.

The interest rate on a Fed funds loan is:

Seasonal credit discount window loans generally have the highest interest rates.

A bank plans on borrowing $450 million for 20 days through a RP transaction collateralized by T-Bills.The current RP rate is 6.25 percent.What is the bank's total interest cost in dollars?

Depository institutions hold deposits with the Federal reserve:

Federal funds today consist exclusively of deposits held at the Federal Reserve banks.

The most common type of Federal funds loans are term loans.