chapter 11

1. When increasing liabilities to meet liquidity needs, a bank should consider all of the following except: brokerage fees. required reserves. FDIC insurance premiums. lost interest income. All of the above should be considered when increasing liabilities to meet liquidity needs.

All of the above should be considered when increasing liabilities to meet liquidity needs.

1. When selling securities to meet liquidity needs, a bank should consider all of the following except: brokerage fees. lost interest income. the gains or losses on the securities. the impact on taxes. All of the above should be considered when selling securities to meet liquidity needs.

All of the above should be considered when selling securities to meet liquidity needs.

1. Which of the following is not considered a monetary policy tool of the Federal Reserve? Changing float requirements Open market operations Changing the discount rate Changing reserve requirements All of the above are considered to be monetary policy tools

Changing float requirements

1. Which of the following is a discretionary factor that will decrease a bank's daily reserves held at the Federal Reserve? Remittances charged Federal funds purchased Yesterday's immediate cash letter Currency received from Federal Reserve Deficit in local clearinghouse

Currency received from Federal Reserve

1. Which of the following is a non-discretionary factor that will increase a bank's daily reserves held at the Federal Reserve? Federal funds sold Receiving a discount window loan Remittances charged Security sales Deposits from the U.S. Treasury

Deposits from the U.S. Treasury

1. Which of the following is a discretionary factor that will increase a bank's daily reserves held at the Federal Reserve? Yesterday's immediate cash letter Federal funds purchased Security purchases Currency received from Federal Reserve Deficit in local clearinghouse

Federal funds purchased

1. Which of the following is not a measure of liability liquidity? Total equity to total assets Core deposits to total assets Total deposits to total assets Federal funds sold to total assets Loan losses to deposits.

Federal funds sold to total assets

1. A bank is currently exactly meeting its reserve requirements of 10%. If the bank has a deposit inflow of $10,000,000, what is the impact on its required reserve position? It now has excess reserves in the amount of $9,000,000. It now has excess reserves in the amount of $10,000,000. It is now deficient $1,000,000 in required reserves. It is now deficient $9,000,000 in required reserves. There would be no impact on the bank's required reserves.

It now has excess reserves in the amount of $9,000,000.

1. Which of the following indicates the potential for deposits leaving a bank? High business activity and growth Deposits that are inelastic to changes in interest rates An aggressive bank loan officer Large deposits held by a single customer Small unused commercial credit lines outstanding

Large deposits held by a single customer

1. Which of the following indicates the potential demand for new loans? Low business growth and activity A relatively large percentage of demand deposits Large, unused commercial credit lines outstanding Large deposits held by a single customer The level of uninsured deposits

Large, unused commercial credit lines outstanding

1. Which of the following is not an advantage of larger cash balances for a bank? Larger cash balances reduce the need to borrow at the discount window. Larger cash balances reduce the risk of bank runs. Larger cash balances reduce the risk of paying penalties to the Federal Reserve. Larger cash balances increase reserve balances. Larger cash balances reduce a bank's interest expense.

Larger cash balances reduce a bank's interest expense.

1. Which of the following is not considered a cash asset? Marketable securities Cash items in process of collection Demand deposits at private financial institutions Demand deposits at the Federal Reserve Vault cash

Marketable securities

1. Which of the following is a non-discretionary factor that will decrease a bank's daily reserves held at the Federal Reserve? Deferred availability items Payments on loans from Federal Reserve Remittances charged Excess from local clearing house Federal funds sold

Remittances charged

1. Which of the following is not considered a highly liquid asset? Federal funds sold 90-day Treasury bills AAA-rated commercial paper A Federal Home Loan Bank Board bond with 6 months until maturity Repurchase agreement

Repurchase agreement

1. In which of the following ways can a bank acquire liquidity? Selling Fed funds Investing in repurchase agreements Increasing the number of loans outstanding Selling Treasury securities Buying back outstanding bank stock

Selling Treasury securities

1. Which of the following does not directly influence the amount of required reserves a bank must hold? The required reserve ratio. The dollar amount of cash items in process of collection. The dollar amount of demand deposits outstanding. The dollar amount of money market deposit accounts outstanding. The dollar amount of NOW accounts outstanding

The dollar amount of NOW accounts outstanding

1. Which of the following is not a reason that banks hold cash assets? To meet customer's needs for currency. To meet capital requirements. To meet required reserves. To compensate for correspondent bank services. To assist in the check clearing process.

To meet capital requirements.

1. Which of the following is not a measure of liability liquidity? Total loans to total assets Total deposits to total assets Total equity to total assets Loan losses to net loans Core deposits to total assets

Total loans to total assets

1. Collateral is required against each of the following liabilities except ________. securities sold under agreement to repurchase borrowings from the Federal Reserve discount window U.S. Treasury securities public deposits owned by the U.S. Treasury Federal Home Loan Bank advances

U.S. Treasury securities

1. Which of the following could be used to identify a potential increase in borrowing by customers that might deplete a bank's cash reserves? The amount of insured versus uninsured deposits Large deposits held by a single entity Volume of Fed Funds sold The sensitivity of deposits to changes in the level of interest rates Unused commercial credit lines outstanding

Unused commercial credit lines outstanding

1. In determining reserves, the banks and the Federal Reserve currently use: a leading reserve accounting system. a contemporaneous reserve accounting system. a lagged reserve accounting system. an actual reserve accounting system. a holding reserve accounting system.

a lagged reserve accounting system.

1. Sweep accounts: allow banks to shift funds from transaction accounts to MMDA accounts. changes customer account balances. reduces a bank's statutory required reserves. All of the above. a. and c. only.

a. and c. only.

1. Correspondent banking services would include which of the following? Check collection Data processing services Federal funds trading all of the above a. & c. only

all of the above

1. The ease of converting an asset to cash with a minimum of loss is known as: asset liquidity. volatile liquidity. core liquidity. liability liquidity. non-core liquidity.

asset liquidity.

1. Which of the following is not considered a viable long-term source of bank liquidity? Federal funds sold Short-term Treasury securities Cash High quality short-term municipal securities Reverse repurchase agreements

cash

1. Volatile deposits: are the largest source of funds for smaller banks. equal the difference between actual current deposits and the base estimate of core deposits. reduce reserve requirements. are a low cost source of funds. all of the above

equal the difference between actual current deposits and the base estimate of core deposits.

1. The check-clearing services of correspondent banks are often used because: the respondent bank is required to purchase a minimum amount of services. it reduces required reserves. the correspondent bank may be marketing their own services in a local community. it often reduces float. it decreases interest income.

it often reduces float.

1. The two-week period during which a bank must hold sufficient legal reserves is called the: deposit computation period. deposit maintenance period. vault cash computation period. base computation period. maintenance period.

maintenance period.

1. There is a short-run trade-off between a bank's liquidity and _______. asset quality profitability discount window borrowing all of the above a. & b. only

profitability

1. The section of a contingency plan that assesses the impact of potential adverse events on the bank's balance sheet is known as the _________ section? narrative qualitative quantitative summary descriptive

quantitative