Question 1

A loan commitment is an agreement to provide a loan up to a certain dollar amount if a customer requests the loan during a specific time period.

Accepted Answer

A) True 
 B)False

Question 2

When a bank sells all or part of the cash stream from a specific loan,

Accepted Answer

A)  it removes the loan from its balance sheet.
B)  it usually does so at a loss.
C)  it usually does so at a profit.
D)  both A and B of the above occur.
E)  both A and C of the above occur.F) All of the above
G) A) and E)

Question 3

Checkable deposits and money market deposit accounts are

Accepted Answer

A)  payable on demand.
B)  liabilities of the banks.
C)  assets of the banks.
D)  only A and B of the above.
E)  only A and C of the above.F) C) and D)
G) B) and D)

Question 4

The value-at-risk method for estimating a bank's risk exposure measures the losses a bank could incur under a worst-case scenario.

Accepted Answer

A) True 
 B)False

Question 5

Explain how a capital crunch can lead to a credit crunch in our economy.

Accepted Answer

The answer of Explain how a capital crunch can lead...

Question 6

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) A) and C)
F) C) and D)

Question 7

A bank failure is more likely to occur when

Accepted Answer

A)  a bank holds less in U.S. government securities.
B)  a bank suffers large deposit outflows.
C)  a bank holds less equity capital.
D)  all of the above occur.
E)  only A and B of the above occur.F) C) and E)
G) A) and E)

Question 8

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) A) and C)
F) B) and C)

Question 9

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) A) and D)
F) None of the above

Question 10

Net profit after taxes per dollar of equity capital is a basic measure of bank profitability called

Accepted Answer

A)  return on assets.
B)  return after taxes.
C)  return on equity.
D)  equity multiplier.E) B) and D)
F) B) and C)

Question 11

A bank fails when the value of its ________ falls below the value of ________, causing the bank to become insolvent.

Accepted Answer

A)  reserves; required reserves
B)  loans; secondary reserves
C)  securities; deposit liabilities
D)  assets; liabilitiesE) None of the above
F) C) and D)

Question 12

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)  deposits with other banks
C)  U) S. Treasury securities
D)  checkable depositsE) C) and D)
F) B) and D)

Question 13

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) A) and D)
F) B) and D)

Question 14

Which of the following are checkable deposits?

Accepted Answer

A)  savings accounts
B)  small-denomination time deposits
C)  negotiable order of withdrawal accounts
D)  certificates of depositE) None of the above
F) C) and D)

Question 15

What are a bank's major sources and uses of funds?

Accepted Answer

Banks operate by balancing their sources...

Question 16

Nontransaction deposits are the primary source of bank funds.

Accepted Answer

A) True 
 B)False

Question 17

For a given return on assets, the lower the bank capital is,

Accepted Answer

A)  the lower the return for the owners of the bank will be.
B)  the higher the return for the owners of the bank will be.
C)  the lower the credit risk for the owners of the bank will be.
D)  both A and C of the above will happen.E) B) and D)
F) A) and B)

Question 18

Banks earn profits by selling ________ with attractive combinations of liquidity, risk, and return, and using the proceeds to buy ________ with a different set of characteristics.

Accepted Answer

A)  loans; deposits
B)  securities; deposits
C)  liabilities; assets
D)  assets; liabilitiesE) B) and C)
F) C) and D)

Question 19

In general, banks make profits by selling ________ liabilities and buying ________ assets.

Accepted Answer

A)  long-term; shorter-term
B)  short-term; longer-term
C)  illiquid; liquid
D)  risky; risk-freeE) A) and B)
F) B) and D)

Question 20

Which of the following bank assets are the most liquid?

Accepted Answer

A)  consumer loans
B)  reserves
C)  cash items in process of collection
D)  U) S. government securitiesE) A) and B)
F) B) and C)

Exam 17: Banking and the Management of Financial Institutions

Which of the following are checkable deposits?

Correct AnswerverifiedShow Answer

The value-at-risk method for estimating a bank's risk exposure measures the losses a bank could incur under a worst-case scenario.

Correct AnswerverifiedShow Answer

Checkable deposits and money market deposit accounts are

Correct AnswerverifiedShow Answer

A bank failure is more likely to occur when

Correct AnswerverifiedShow Answer

Net profit after taxes per dollar of equity capital is a basic measure of bank profitability called

Correct AnswerverifiedShow Answer

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

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In general, banks make profits by selling ________ liabilities and buying ________ assets.

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Which of the following bank assets are the most liquid?

Correct AnswerverifiedShow Answer

Nontransaction deposits are the primary source of bank funds.

Correct AnswerverifiedShow Answer

Banks earn profits by selling ________ with attractive combinations of liquidity, risk, and return, and using the proceeds to buy ________ with a different set of characteristics.

Correct AnswerverifiedShow Answer

For a given return on assets, the lower the bank capital is,

Correct AnswerverifiedShow Answer

What are a bank's major sources and uses of funds?

Correct AnswerAnswered by ExamLex AIBanks operate by balancing their sources...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

A bank fails when the value of its ________ falls below the value of ________, causing the bank to become insolvent.

Correct AnswerverifiedShow Answer

When a bank sells all or part of the cash stream from a specific loan,

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

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

Explain how a capital crunch can lead to a credit crunch in our economy.

Correct AnswerverifiedShow Answer

A loan commitment is an agreement to provide a loan up to a certain dollar amount if a customer requests the loan during a specific time period.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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In general, banks make profits by selling liabilities and buying assets.

Correct Answer
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Banks earn profits by selling with attractive combinations of liquidity, risk, and return, and using the proceeds to buy with a different set of characteristics.

Correct Answer
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Correct Answer
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Correct Answer
Answered by ExamLex AI
Banks operate by balancing their sources...
View Answer

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

Correct Answer
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A bank fails when the value of its falls below the value of , causing the bank to become insolvent.

Correct Answer
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