Question 1

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; expensesE) A) and B)
F) A) and C)

Question 2

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.E) All of the above
F) A) and B)

Question 3

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.E) All of the above
F) C) and D)

Question 4

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 aboveF) C) and D)
G) All of the above

Question 5

Discount loans are also known as ________.

Accepted Answer

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

Question 6

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 aboveF) A) and D)
G) None of the above

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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.E) A) and C)
F) A) and B)

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.E) C) and D)
F) A) and D)

Question 10

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.E) B) and D)
F) A) and C) A

Question 11

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.E) None of the above
F) All of the above

Question 12

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.E) A) and B)
F) A) and C)

Question 13

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 aboveF) B) and C)
G) A) and E)

Question 14

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 15

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.E) B) and C)
F) B) and D) B

Question 16

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)   ReservesE) None of the above
F) B) and C)

Question 17

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 securitiesE) All of the above
F) B) and C)

Question 18

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.E) A) and D)
F) B) and C)

Question 19

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 aboveE) A) and C)
F) All of the above

Question 20

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; sourceE) B) and C)
F) All of the above B

Exam 17: Banking and the Management of Financial Institutions

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Discount loans are also known as ________.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the late 1960s,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The largest source of bank income is

Correct AnswerverifiedA

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

Correct AnswerverifiedShow Answer

A bank's largest source of funds is its

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedB

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedB

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

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A

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B

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

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

Correct Answer
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B