ECON 308 QUIZ CHP 9 UDEL
Bank reserves include A.vault cash and deposits at the Fed. B.deposits at the Fed and short-term treasury securities. C.deposits at other banks and deposits at the Fed. D.vault cash and short-term Treasury securities.
A
Bankers' concerns 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 A.liquidity management. B.managing interest rate risk. C.managing credit risk. D.liability management.
A
If a bank has $10 million of checkable deposits, a required reserve ratio of 10 percent, and it holds $2 million in reserves, then it will not have enough reserves to support a deposit outflow of A.$1.2 million. B.$1.1 million. C.$1 million. D.$900,000.
A
Long-term customer relationships ________ the cost of information collection and make it easier to ________ credit risks. A.reduce; screen B.increase; increase C.reduce; increase D.increase; screen
A
Through correspondent banking, large banks provide services to small banks, including A.foreign exchange transactions. B.debt reduction. C.loan guarantees. D.issuing stock.
A
When a new depositor opens a checking account at the First National Bank, the bank's assets ________ and its liabilities ________. A.increase; increase B.decrease; decrease C.decrease; increase D.increase; decrease
A
When banks calculate the losses the institution would incur if an unusual combination of bad events happened, the bank is using the ________ approach. A.stress-test B.maximum value C.trading-loss D.value-at-risk
A
Banks may borrow from or lend to another bank in the Federal Funds market. A loan of excess reserves from one bank to another bank is recorded as a(n) ________ for the borrowing bank and a(n) ________ for the lending bank. A.asset; asset B.liability; asset C.asset; liability D.liability; liability
B
Because checking accounts are ________ liquid for the depositor than savings accounts, they earn ________ interest rates. A.less; lower B.more; lower C.more; higher D.less; higher
B
Examples of off-balance-sheet activities include A.borrowing from other banks. B.trading activities. C.extending loans to depositors. D.selling negotiable CDs.
B
Holding large amounts of bank capital helps prevent bank failures because A.it makes loans easier to sell. B.it can be used to absorb the losses resulting from bad loans. C.it makes it easier to call in loans. D.it means that the bank has a higher income.
B
If a bank has ________ rate-sensitive assets than liabilities, a ________ in interest rates will reduce bank profits, while a ________ in interest rates will raise bank profits. A.fewer; decline; decline B.more; decline; rise C.fewer; rise; rise D.more; rise; decline
B
The amount of assets per dollar of equity capital is called the A.equity ratio. B.equity multiplier. C.asset ratio. D.asset multiplier.
B
As the costs associated with deposit outflows ________, the banks willingness to hold excess reserves will ________. A.increase; decrease B.decrease; increase C.increase; increase D.decrease; not be affected
C
Duration analysis involves comparing the average duration of the bank's ________ to the average duration of its ________. A.securities portfolio; non-deposit liabilities B.loan portfolio; deposit liabilities C.assets; liabilities D.assets; deposit liabilities
C
Property promised to the lender as compensation if the borrower defaults is called A.contingencies. B.restrictive covenants. C.collateral. D.deductibles.
C
Secondary reserves include A.deposits at Federal Reserve Banks. B.state and local government securities. C.short-term U.S. government securities. D.deposits at other large banks.
C
When banks offer borrowers smaller loans than they have requested, banks are said to A.raze credit. B.shave credit. C.ration credit. D.rediscount the loan.
C
Which of the following are reported as liabilities on a bank's balance sheet? A.reserves B.real estate loans C.discount loans D.U.S. Treasury securities
C
A $100 deposit into my checking account at My Bank increases my checkable deposits by $100, and the bank's ________ by $100. A.loans B.capital C.securities D.reserves
D
Bank capital has both benefits and costs for the bank owners. Higher bank capital ________ the likelihood of bankruptcy, but higher bank capital ________ the return on equity for a given return on assets. A.increases; increases B.reduces; increases C.increases; reduces D.reduces; reduces
D
In general, banks make profits by selling ________ liabilities and buying ________ assets. A.illiquid; liquid B.risky; risk-free C.long-term; shorter-term D.short-term; longer-term
D
When $1 million is deposited at a bank, the required reserve ratio is 20 percent, and the bank chooses not to make any loans but to hold excess reserves instead, then, in the bank's final balance sheet A.reserves increase by $200,000. B.the liabilities of the bank decrease by $1 million. C.liabilities increase by $200,000. D.the assets at the bank increase by $1 million.
D
Which of the following statements is FALSE? A.A bank issues liabilities to acquire funds. B.A bank's assets are its uses of funds. C.The bank's assets provide the bank with income. D.Bank capital is recorded as an asset on the bank balance sheet.
D
________ may antagonize customers and thus can be a very costly way of acquiring funds to meet an unexpected deposit outflow. A.Selling securities B.Selling negotiable CDs C.Selling loans D.Calling in loans
D
Traders working for banks are subject to the A.exchange-risk problem. B.principal-agent problem. C.free-rider problem. D.double-jeopardy problem.
B
Which of the following statements is FALSE? A.Checkable deposits include NOW accounts. B.Checkable deposits are usually the lowest cost source of bank funds. C.Checkable deposits are the primary source of bank funds. D.Checkable deposits are payable on demand
C
