Question 1

According to recent studies cited in this chapter,in choosing a bank to supply their deposits and other services,which of the following factors do business firms rank first?

Accepted Answer

A)  Quality of financial advice given
B)  Financial health of lending institution
C)  Whether loans are competitively priced
D)  Whether cash management and operations services are provided
E)  Quality of bank officers B

Question 2

From an analysis on its deposits,a bank determines that account processing and other operating expenses cost the bank $4.15 per month.It has also determined that non-operating expenses on its deposits are $1.65 per month.The bank wants to have a profit margin which is 10 percent of monthly costs.What monthly fee should the bank charge on its deposit accounts?

Accepted Answer

A)  $6.38 per month
B)  $5.80 per month
C)  $4.57 per month
D)  $4.15 per month
E)  None of the options is correct A

Question 3

When financial institutions tempt customers by paying postage both ways in bank-by-mail services or by offering free gifts such as teddy bears,they are practicing __________.

Accepted Answer

nonprice competition

Question 4

A checking account price schedule characterized by absence of any monthly account maintenance fee or per-transaction fee is called:

Accepted Answer

A)  free pricing.
B)  conditionally free pricing.
C)  flat-rate pricing.
D)  marginal cost pricing.
E)  nonprice competition.

Question 5

When a customer is charged a fixed cost per check,per period,or both,it is called __________________ pricing.

Accepted Answer

The answer of When a customer is charged a fixed...

Question 6

An MMDA is a short-term deposit where the bank can offer a competitive interest rate and which allows up to six preauthorized drafts per month.

Accepted Answer

A) True 
 B)False

Question 7

Nonprice competition for deposits has tended to distort the allocation of scarce resources in the banking sector.

Accepted Answer

A) True 
 B)False

Question 8

Deposit accounts whose principal function is to make payments for purchases of goods and services are called:

Accepted Answer

A)  drafts.
B)  second-party payments accounts.
C)  thrift deposits.
D)  transaction accounts.
E)  None of the options is correct.

Question 9

Domestic deposits generate legal reserves.

Accepted Answer

A) True 
 B)False

Question 10

Money market deposit accounts (MMDAs),offering flexible interest rates,accessible for payments purposes,and designed to compete with share accounts offered by money market mutual funds,were authorized by the:

Accepted Answer

A)  Glass-Steagall Act.
B)  Depository Institutions Deregulation and Monetary Control Act (DIDMC
A)  .
C)  Bank Holding Company Act.
D)  Garn-St.Germain Depository Institutions Act.
E)  None of the options is correct.

Question 11

When the government collects taxes or sells Treasuries,it usually directs these funds into TT&L deposits first:

Accepted Answer

A)  as per the directions of the supreme court.
B)  to repay for the money borrowed earlier.
C)  to minimize the impact of operations on the financial system.
D)  to decrease the money supply in the economy.
E)  to neutralize the impact of operations on the financial system.

Question 12

Depositors must send their customers the amount of interest earnings received,along with the _________________ earned.It is the interest rate the customer has actually earned on the account.

Accepted Answer

The answer of Depositors must send their customers the amount...

Question 13

Personal checking accounts tend to be more profitable for banks than commercial checking accounts.

Accepted Answer

A) True 
 B)False

Question 14

Prior to Depository Institution Deregulation and Control Act (DIDMCA)being passed,banks used ______________.This tended to distort the allocation of scarce resources.

Accepted Answer

A)  free pricing
B)  conditionally free pricing
C)  flat-rate pricing
D)  marginal cost pricing
E)  nonprice competition

Question 15

While demand deposits have about the same gross expenses per dollar of deposit as time deposits do,the _____________ levied against transaction account customers help to lower the net cost of checkable deposits.

Accepted Answer

A)  higher account opening fees
B)  higher service fees
C)  higher pre-closure fees
D)  lower interest rates
E)  less number of services

Question 16

Interest-bearing checking accounts,on average,tend to generate lower net returns for banks than regular (non-interest-bearing)checking accounts.

Accepted Answer

A) True 
 B)False

Question 17

A customer has a savings account for one year.During the year he earns $65.50 in interest.For 180 days he has $2,000 in the account and for another 180 days he has $1,000 in the account.What is the annual percentage yield on this savings account?

Accepted Answer

A)  6.55%
B)  3.28%
C)  4.42%
D)  8.73%
E)  None of the options is correct

Question 18

_________________________ is a way of pricing deposit services in which the rate,or return,or the fees charged on the deposit accounts are based on the cost of offering the service plus a profit margin.

Accepted Answer

The answer of _________________________ is a way of pricing deposit...

Question 19

Under the Truth in Savings Act,customers must be informed of the impact of any early deposit withdrawals on the annual percentage yield they expect to receive from an interest-bearing deposit.

Accepted Answer

A) True 
 B)False

Question 20

According to the textbook,business (commercial)transaction accounts are generally more profitable than personal checking accounts.Which of the following explains the reason(s)behind this statement?

Accepted Answer

A)  The average size of a business transaction is smaller than a personal transaction.
B)  Interest expenses associated with a commercial deposit transaction are higher.
C)  The bank receives less investable funds in the commercial deposit transactions.
D)  The average size of a business transaction is smaller than a personal transaction and interest expenses associated with commercial deposit transactions are higher.
E)  Interest expenses associated with commercial deposit transactions are lower and a bank receives more investable funds in the commercial deposits transactions.

Exam 12: Managing and Pricing Deposit Services

According to recent studies cited in this chapter,in choosing a bank to supply their deposits and other services,which of the following factors do business firms rank first?

When financial institutions tempt customers by paying postage both ways in bank-by-mail services or by offering free gifts such as teddy bears,they are practicing __________.

A checking account price schedule characterized by absence of any monthly account maintenance fee or per-transaction fee is called:

When a customer is charged a fixed cost per check,per period,or both,it is called __________________ pricing.

An MMDA is a short-term deposit where the bank can offer a competitive interest rate and which allows up to six preauthorized drafts per month.

Nonprice competition for deposits has tended to distort the allocation of scarce resources in the banking sector.

Deposit accounts whose principal function is to make payments for purchases of goods and services are called:

Domestic deposits generate legal reserves.

Money market deposit accounts (MMDAs) ,offering flexible interest rates,accessible for payments purposes,and designed to compete with share accounts offered by money market mutual funds,were authorized by the:

When the government collects taxes or sells Treasuries,it usually directs these funds into TT&L deposits first:

Depositors must send their customers the amount of interest earnings received,along with the _________________ earned.It is the interest rate the customer has actually earned on the account.

Personal checking accounts tend to be more profitable for banks than commercial checking accounts.

Prior to Depository Institution Deregulation and Control Act (DIDMCA) being passed,banks used ______________.This tended to distort the allocation of scarce resources.

While demand deposits have about the same gross expenses per dollar of deposit as time deposits do,the _____________ levied against transaction account customers help to lower the net cost of checkable deposits.

Interest-bearing checking accounts,on average,tend to generate lower net returns for banks than regular (non-interest-bearing)checking accounts.

A customer has a savings account for one year.During the year he earns $65.50 in interest.For 180 days he has $2,000 in the account and for another 180 days he has $1,000 in the account.What is the annual percentage yield on this savings account?

_________________________ is a way of pricing deposit services in which the rate,or return,or the fees charged on the deposit accounts are based on the cost of offering the service plus a profit margin.

Under the Truth in Savings Act,customers must be informed of the impact of any early deposit withdrawals on the annual percentage yield they expect to receive from an interest-bearing deposit.

According to the textbook,business (commercial) transaction accounts are generally more profitable than personal checking accounts.Which of the following explains the reason(s) behind this statement?