Thẻ ghi nhớ: Chapter 9: Comercial bank operations | Quizlet

1. Which of the following statements is incorrect?

A) Banks have expanded their business across services over time.

B) Acquisitions have been a convenient method for banks to grow quickly and capitalize on economies of scale.

C) The banking industry has become less concentrated in recent years.

D) All of the statements above are correct.

C

5. ______are offered to bank customers who desire to write checks against their account.

A) Time deposit accounts

B) CDs

C) Demand deposit accounts

D) Money market deposit accounts

C

6. Which type of savings account transfers funds to a checking account when checks are written?

A) ATS

B) passbook savings

C) CDs

D) MMDA

A

7. A(n)____ account provides checking services as well as interest.

A) demand deposit

B) negotiable order of withdrawal (NOW)

C) passbook savings

D) time deposit

B

8. Protective covenants impose conditions in which the bank must provide additional loans to a borrower to protect the borrower from going bankrupt.

A) true

B) false

B

9. A______is a time deposit offered by some large banks to corporations, with a specific maturity date, minimum deposit of $100,000 or more, and a secondary market.

A) retail CD

B) negotiable CD

C) market CD

D) protective CD

B

10. A bank's sources of funds represent liabilities or equity of the bank.

A) true

B) false

A

2. Commercial banks have expanded in recent years not only by acquiring other banks but also by acquiring other types of financial service firms.

A) True

False

A

3. Commercial banks can be a lender or a borrower when using repurchase agreements and loans in the federal funds market.

A) True

False

A

4. The operations, management, and regulation of a financial conglomerate are the same irrespective of the types of services offered.

A) True

False

B

11. Money market deposit accounts differ from conventional time deposits in that they

A) specify a maturity.

B) offer limited check writing privileges.

C) are less liquid.

D) none of the above

B

12. The intent of federal funds transactions is to

A) correct short-term fund imbalances experienced by banks.

B) correct long-term fund imbalances experienced by banks.

C) serve as a permanent source of bank capital.

D) serve as the primary depository source of funds.

A

13. For any given bank, federal funds_____represent a(n) ____.

A) purchased; asset

B) sold; liability

C) purchased; liability

D) A and B

C

14. The federal funds rate is generally_____ the Treasury bill rate.

A) equal to

B) between .50 percent and 1.00 percent below

C) between .25 percent and 1.00 percent above

D) between 3.00 percent and 4.50 percent above

C

15. Obtaining funds through______ is not a common source of funds for banks to satisfy a temporary deficiency of funds?

A) issuing bonds

B) the federal funds market

C) repurchase agreements

D) borrowing from the Federal Reserve

A

16. Which of the following is true?

A) The primary credit lending rate is set by the president of the United States.

B) The federal funds rate is set by the president of the United States.

C) The primary credit lending rate is set by commercial banks.

D) The primary credit lending rate is now set at a level above the federal funds rate.

E) A and B

D

17. The Federal Reserve provides loans to banks in order to

A) resolve permanent shortages of funds experienced by banks.

B) resolve temporary shortages of funds experienced by banks.

C) finance the shortages of funds of finance companies.

D) none of the above

B

18. When a bank in need of funds for a few days sells some of its government securities to a corporation with a temporary excess of funds, then buys them back shortly thereafter, this is a

A) federal funds loan.

B) discount window loan.

C) repurchase agreement.

D) commercial paper transaction.

C

19. When banks need funding for just a few days, they would most likely

A) issue bonds and then call them.

B) issue stock and then repurchase it.

C) borrow in the federal funds market.

D) issue NCDs.

C

20. Because U.S. dollars are widely used as an international medium of exchange, the Eurodollar market is very active.

A) True

False

A

21. Subordinated notes and debentures are examples of

A) primary capital.

B) secondary capital.

C) depository sources of funds.

D) repurchase agreements.

B

22. All other things equal, when banks issue new stock, they

A) increase reported earnings per share.

B) decrease their ability to absorb operating losses.

C) dilute the ownership of the bank.

D) A and B

C

23. As a source of funds, small banks rely more heavily on____, and larger banks rely more heavily on_____ .

A) time deposits and foreign deposits; savings deposits and short-term borrowings

B) savings deposits and short-term borrowings; foreign deposits and time deposits

C) savings and time deposits; foreign deposits and short-term borrowings

D) foreign deposits and short-term borrowings; savings and time deposits

C

24. Cash held ______ represents the major portion of a bank's required reserves.

A) at other commercial banks

B) in a bank's vault

C) on deposit at the federal funds window

D) on deposit with the Board of Governors

B

25. The main use of bank funds is for

A) loans.

B) investment securities.

C) fixed assets.

D) repurchase agreements.

A

26. Bank loans designed to support a firm's ongoing business operations are called

A) term loans.

B) working capital loans.

C) direct lease loans.

D) revolving credit loans.

B

27.________loans are primarily used to finance the purchase of fixed assets.

A) Term

B) Working capital

C) Informal line of credit

D) Revolving credit

A

28. Which of the following is most appropriate for a business that may experience a sudden need for funds but does not know precisely when?

A) working capital loan

B) direct lease loan

C) term loan

D) informal line of credit

D

29. A _______loan may be especially appropriate when the bank wishes to avoid adding more debt to its balance sheet.

A) term

B) bullet

C) direct lease

D) revolving credit

C

30. The interest rate banks charge their most creditworthy customers is known as the

A) federal funds rate.

B) primary credit lending rate.

C) prime rate.

D) call money rate.

C

31. Transaction deposits do not include

A) demand deposits.

B) NCDs.

C) NOW accounts.

D) all of the above are transactions deposits

B

32. When comparing Treasury securities and government agency securities

A) neither have default risk.

B) the yield on Treasury securities is higher.

C) interest income on federal agency securities is exempt from state and local income taxes.

D) government agency securities are subject to default risk.

D

33. Money market deposit accounts (MMDAs)

A) require a maturity of 6 months or longer.

B) allow a limited number of checks to be written against the account.

C) pay a higher interest rate than CDs.

D) none of the above

B

34. Which of the following accounts does not allow checks (at least a limited amount) to be written?

A) NOW accounts

B) money market deposit accounts (MMDAs)

C) retail CDs

D) all of the above allow checks to be written

C

33. Banks sometimes need funds and sometimes have excess funds available. Which of the following is commonly a source of bank funds and a use of bank funds?

A) MMDAs

B) federal funds

C) the discount window

D) retail CDs

B

36. The bank holding company structure allows more flexibility to borrow funds, issue stock, repurchase the company's own stock, and acquire other firms.

A) True

False

A

37. Like other market interest rates, the primary credit lending rate moves in reaction to changes in demand or supply of funds or both.

A) True

False

B

38. The yield on repurchase agreements is slightly higher than the federal funds rate at any given point in time.

A) True

B) False

B

39. Bank regulators are concerned that banks may maintain a higher level of capital than they should and have therefore imposed capital requirements on them.

A) True

B) False

B

40. In a revolving credit loan, the bank typically charges businesses a commitment fee on any unused funds.

A) True

B) False

A

41. Bank rates on credit card balances are usually not very different from the rate charged on business loans.

A) True

False

B

42. While U.S. banks have expanded into non-U.S. markets, few non-U.S. banks have entered

U.S. markets.

A) True

False

B

43. _____ is (are) not a major source of funds for commercial banks.

A) Deposit accounts

B) Borrowed funds

C) Commercial loans

D) Bank capital

E) All of the above are commercial banks sources of funds.

C

44. Which of the following statements is incorrect with respect to the federal funds market?

A) It allows depository institutions to accommodate the short-term liquidity needs of other financial institutions.

B) Federal funds purchased represent an asset to the borrowing bank and a liability to the lending bank that sells them.

C) The federal funds market is typically most active on Wednesday, because that is the final day of each particular settlement period for which each bank must maintain a specified volume of reserves required by the Fed.

D) All of the above are true with respect to the federal funds market.

B

45. The federal funds rate is typically_____the primary credit lending rate.

A) greater than

B) less than

C) equal to

D) none of the above

A

46. _______are the largest bank source of funds as a percentage of total liabilities.

A) Small-denomination time deposits

B) Money market deposit accounts (MMDAs)

C) Transaction deposits

D) Borrowed funds

E) Savingsdeposits(including MMDAs)

E

47. __________do not specify a maturity and provide limited check-writing ability (they allow only a limited number of transactions per month).

A) Money market deposit accounts (MMDAs)

B) Negotiable CDs (NCDs)

C) Retail CDs

D) Callable CDs

E) Negotiableorderofwithdrawal (NOW) accounts

A

48._______loans are extended primarily to finance the purchase of fixed assets such as machinery.

A) Term

B) Working capital

C) Bullet

D) Direct lease

E) Answers a and c are correct.

E

49. Which of the following is not an off-balance sheet activity for commercial banks?

A) consumer loans

B) loan commitments

C) standby letters of credit

D) swap contracts

E) All of the above are off-balance sheet activities

A

50. A_____is a type loan commitment.

A) standby letter of credit (SLC)

B) note issuance facility (NIF)

C) forward contract

D) swap contract

E) none of the above

B

51. When a bank obtains funds through a ______, the provider of the funds receives collateral.

A) retail CD

B) NOW account

C) repurchase agreement

D) a money market deposit account

C

52. When banks obtain funds in the federal funds market, the providers of the funds are

A) other depository institutions.

B) nonfinancial corporations.

C) consumers.

D) the Federal Reserve.

A

53. A single loan in the federal funds market is usually for ______; when a bank sells a single repurchase agreement, the maturity is usually ______.

A) just a few days; one year or more

B) several weeks; one year or more

C) several weeks; just a few days

D) just a few days; just a few days

D

54. The interest rate charged on loans between depository institutions is commonly referred to as the

A) federal funds rate.

B) discount rate.

C) primary credit lending rate.

D) none of the above

A

55. The interest rate charged on loans from the Federal Reserve to banks is commonly referred to as the

A) federal funds rate.

B) primary credit lending rate.

C) repo rate.

D) none of the above

B

56. The primary credit lending rate is determined by

A) the Federal Reserve.

B) Congress.

C) the Treasury.

D) the President of the United States.

A

57. Bank capital represents funds obtained through ______ and through ______.

A) issuing stock; offering long term CDs

B) issuing repurchase agreements; issuing bonds

C) issuing stock; retaining earnings

D) offering long term CDs; issuing bonds

C

58. Banks sometimes prefer to minimize their amount of capital since

A) interest payments must be paid by the bank on all capital that is held.

B) they try to avoid diluting ownership of the bank.

C) A and B

D) none of the above

B

59. When a bank obtains funds through ______, households are not a common provider of the funds.

A) NOW accounts

B) retail CDs

C) passbook savings accounts

D) NCDs

D

60. Which of the following is not an off-balance sheet activity?

A) highly leveraged transactions (HLTs)

B) standby letters of credit

C) forward contracts

D) swap contracts

A

61. A bank's uses of funds represent liabilities of a bank.

A) true

B) false

B

62. ____________ are the largest bank source of funds (as a percentage of total liabilities).

A) Small-denomination time deposits

B) Federal funds borrowed

C) Transaction deposits

D) Bonds

E) Savings deposits (including MMDAs)

E

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