Question 1

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 B

Question 2

The largest source of bank income is

Accepted Answer

A)  interest on loans. 
B)  interest on securities. 
C)  service charges on deposit accounts. 
D)  noninterest income. 
A)  interest on loans. 
B)  interest on securities. 
C)  service charges on deposit accounts. 
D)  noninterest income. A

Question 3

An argument that supports a regulated minimum capital requirement is that banks that hold too little capital

Accepted Answer

A)  are unprofitable. 
B)  impose costs on other banks because they are more likely to fail. 
C)  have an unfair competitive advantage over savings and loans. 
D)  includes all of the above. 
A)  are unprofitable. 
B)  impose costs on other banks because they are more likely to fail. 
C)  have an unfair competitive advantage over savings and loans. 
D)  includes all of the above. B

Question 4

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 5

In the late 1960s,

Accepted Answer

A)  money market banks no longer needed to depend on checkable deposits as the primary source of bank funds. 
B)  banks aggressively set target goals for their asset growth. 
C)  the new management of liabilities created more flexibility. 
D)  all of the above. 
A)  money market banks no longer needed to depend on checkable deposits as the primary source of bank funds. 
B)  banks aggressively set target goals for their asset growth. 
C)  the new management of liabilities created more flexibility. 
D)  all of the above.

Question 6

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

Accepted Answer

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

Question 7

Banks fail when the value of bank ________ falls below the value of ________,causing the bank to become insolvent.

Accepted Answer

A)  reserves; required reserves 
B)  loans; secondary reserves 
C)  assets; liabilities 
D)  income; expenses 
A)  reserves; required reserves 
B)  loans; secondary reserves 
C)  assets; liabilities 
D)  income; expenses

Question 8

In general,banks would prefer to meet deposit outflows by ________ rather than ________.

Accepted Answer

A)  selling loans; selling securities 
B)  selling loans; borrowing from the Fed 
C)  borrowing from the Fed; selling loans 
D)  "calling in" loans; selling securities 
A)  selling loans; selling securities 
B)  selling loans; borrowing from the Fed 
C)  borrowing from the Fed; selling loans 
D)  "calling in" loans; selling securities

Question 9

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 10

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 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 not reported as assets on a bank's balance sheet?

Accepted Answer

A)  Cash items in the process of collection 
B)  Borrowings 
C)  U.S. Treasury securities 
D)  Reserves 
A)  Cash items in the process of collection 
B)  Borrowings 
C)  U.S. Treasury securities 
D)  Reserves

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

Discount loans are also known as ________.

Accepted Answer

A)  interest-free loans 
B)  advances 
C)  credits 
D)  market loans 
A)  interest-free loans 
B)  advances 
C)  credits 
D)  market loans

Question 15

Bankers' concern regarding the optimal mix of excess reserves,secondary reserves,borrowings from the Fed,and borrowings from other banks to deal with deposit outflows is an example of

Accepted Answer

A)  liability management. 
B)  liquidity management. 
C)  managing interest-rate risk. 
D)  none of the above. 
A)  liability management. 
B)  liquidity management. 
C)  managing interest-rate risk. 
D)  none of the above.

Question 16

With large banks beginning to explore ways in which the liabilities on their balance sheets could provide them with reserves and liquidity,this led to

Accepted Answer

A)  the expansion of overnight loan markets. 
B)  the development of negotiable CDs. 
C)  the ability of money center banks to acquire funds quickly. 
D)  all of the above occurring. 
A)  the expansion of overnight loan markets. 
B)  the development of negotiable CDs. 
C)  the ability of money center banks to acquire funds quickly. 
D)  all of the above occurring.

Question 17

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 18

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

Accepted Answer

A)  Discount loans 
B)  Cash items in the process of collection 
C)  State government securities 
D)  All of the above 
E)  Only B and C of the above 
A)  Discount loans 
B)  Cash items in the process of collection 
C)  State government securities 
D)  All of the above 
E)  Only B and C of the above

Question 19

A bank's largest source of funds is its

Accepted Answer

A)  nontransaction deposits. 
B)  checking deposits. 
C)  borrowing from the Fed. 
D)  federal funds. 
A)  nontransaction deposits. 
B)  checking deposits. 
C)  borrowing from the Fed. 
D)  federal funds.

Question 20

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

Accepted Answer

A)  Borrowings 
B)  Reserves 
C)  Savings deposits 
D)  Bank capital 
E)  Only A and B of the above 
A)  Borrowings 
B)  Reserves 
C)  Savings deposits 
D)  Bank capital 
E)  Only A and B of the above

Exam 17: Banking and the Management of Financial Institutions

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

The largest source of bank income is

An argument that supports a regulated minimum capital requirement is that banks that hold too little capital

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

In the late 1960s,

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

Banks fail when the value of bank ________ falls below the value of ________,causing the bank to become insolvent.

In general,banks would prefer to meet deposit outflows by ________ rather than ________.

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

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.

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

Which of the following are not reported as assets on a bank's balance sheet?

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

Discount loans are also known as ________.

Bankers' concern regarding the optimal mix of excess reserves,secondary reserves,borrowings from the Fed,and borrowings from other banks to deal with deposit outflows is an example of

With large banks beginning to explore ways in which the liabilities on their balance sheets could provide them with reserves and liquidity,this led to

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

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

A bank's largest source of funds is its

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

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

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

Financial Crises In Emerging Market Economies

Savings Associations and Credit Unions

Finance Companies

Filters

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

Banks fail when the value of bank falls below the value of ,causing the bank to become insolvent.

In general,banks would prefer to meet deposit outflows by rather than .