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Question
The spread between the interest rates on Baa corporate bonds and U.S. government bonds is very large during the Great Depression years 1930-1933. Explain this difference using the bond supply and demand analysis.
Answer
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Related questions
Q:
The process in which people take their funds out of the banking system seeking higher-yielding securities is called
A) capital mobility.
B) loophole mining.
C) disintermediation.
D) deposit jumping.
Q:
Prior to 2008, bank managers looked on reserve requirements
A) as a tax on deposits.
B) as a subsidy on deposits.
C) as a subsidy on loans.
D) as a tax on loans.
Q:
The process of transforming otherwise illiquid financial assets into marketable capital market instruments is known as
A) securitization.
B) internationalization.
C) arbitrage.
D) program trading.
Q:
Bank customers perceive Internet banks as being
A) more secure than physical bank branches.
B) a better method for the purchase of long-term savings products.
C) better at keeping customer information private.
D) prone to many more technical problems.
Q:
The agreement to provide a standardized commodity to a buyer on a specific date at a specific future price is
A) a put option.
B) a call option.
C) a futures contract.
D) a mortgage-backed security.
Q:
With the creation of the Federal Deposit Insurance Corporation, member banks of the Federal Reserve System ________ to purchase FDIC insurance for their depositors, while non-member commercial banks ________ to buy deposit insurance.
A) could choose; were required
B) could choose; were given the option
C) were required, could choose
D) were required; were required
Q:
Probably the most significant factor explaining the drastic drop in the number of bank failures since the Great Depression has been
A) the creation of the FDIC.
B) rapid economic growth since 1941.
C) the employment of new procedures by the Federal Reserve.
D) better bank management.
Q:
The Federal Reserve Act of 1913 required that
A) state banks be subject to the same regulations as national banks.
B) national banks establish branches in the cities containing Federal Reserve banks.
C) national banks join the Federal Reserve System.
D) state banks could not join the Federal Reserve System.
Q:
The U.S. banking system is considered to be a dual system because
A) banks offer both checking and savings accounts.
B) it actually includes both banks and thrift institutions.
C) it is regulated by both state and federal governments.
D) it was established before the Civil War, requiring separate regulatory bodies for the North and South.
Q:
The National Bank Act of 1863, and subsequent amendments to it,
A) created a banking system of state-chartered banks.
B) established the Office of the Comptroller of the Currency.
C) broadened the regulatory powers of the Federal Reserve.
D) created insurance on deposit accounts.
Q:
The belief that bank failures were regularly caused by fraud or the lack of sufficient bank capital explains, in part, the passage of
A) the National Bank Charter Amendments of 1918.
B) the Garn-St. Germain Act of 1982.
C) the National Bank Act of 1863.
D) Federal Reserve Act of 1913.
Q:
Currency circulated by banks that could be redeemed for gold was called
A) junk bonds.
B) banknotes.
C) gold bills.
D) state money.
Q:
The Second Bank of the United States was denied a new charter by
A) President Andrew Jackson.
B) Vice President John Calhoun.
C) President Benjamin Harrison.
D) President John Q. Adams.
Q:
Because of the abuses by state banks and the clear need for a central bank to help the federal government raise funds during the War of 1812, Congress created the
A) Bank of United States in 1812.
B) Bank of North America in 1814.
C) Second Bank of the United States in 1816.
D) Second Bank of North America in 1815.
Q:
The modern commercial banking system began in America when the
A) Bank of United States was chartered in New York in 1801.
B) Bank of North America was chartered in Philadelphia in 1782.
C) Bank of United States was chartered in Philadelphia in 1801.
D) Bank of North America was chartered in New York in 1782.
Q:
________ within the U.S. can make loans to foreigners but cannot make loans to domestic residents.
A) Edge Act corporations
B) International Banking Facilities
C) Universal banks
D) Euro banks
Q:
U.S. banks have most of their branches in
A) Latin America, the Far East, the Caribbean, and London.
B) Latin America, the Middle East, the Caribbean, and London.
C) Mexico, the Middle East, the Caribbean, and London.
D) South America, the Middle East, the Caribbean, and Canada.
Q:
The main center of the Eurodollar market is
A) London.
B) Basel.
C) Paris.
D) New York.
Q:
Mutual savings banks are owned by
A) shareholders.
B) partners.
C) depositors.
D) foreign investors.
Q:
The FHLBS gives loans to S&Ls and thus performs a function similar to the ________ for commercial banks.
A) Federal Reserve
B) U.S. Treasury
C) Office of the Comptroller of the Currency
D) U.S. Mint
Q:
Unlike banks, ________ have been allowed to branch statewide since 1980.
A) federally-chartered S&Ls
B) state-chartered S&Ls
C) financially troubled S&Ls
D) technically insolvent S&Ls
Q:
In a ________ banking system, commercial banks engage in securities underwriting, but legal subsidiaries conduct the different activities. Also, banking and insurance are not typically undertaken together in this system.
A) universal
B) British-style universal
C) short-fence
D) compartmentalized
Q:
Bank loans from the Federal Reserve are called ________ and represent a ________ of funds.
A) discount loans; use
B) discount loans; source
C) fed funds; use
D) fed funds; source
Q:
Large-denomination CDs are ________, so that like a bond they can be resold in a ________ market before they mature.
A) nonnegotiable; secondary
B) nonnegotiable; primary
C) negotiable; secondary
D) negotiable; primary
Q:
Which of the following are reported as liabilities on a bank's balance sheet?
A) Discount loans
B) Reserves
C) U.S. Treasury securities
D) Loans
Q:
Looking at the Net Interest Margin indicates that the poor bank performance in the late 1980s
A) was not the result of interest-rate movements.
B) was not the result of risky loans made in the early 1980s.
C) resulted from a narrowing of the gap between interest earned on assets and inters paid on liabilities.
D) resulted from a huge decrease in provisions for loan losses.
Q:
All of the following are operating expenses for a bank except
A) service charges on deposit accounts.
B) salaries and employee benefits.
C) rent on buildings.
D) servicing costs of equipment such as computers.
Q:
Duration analysis involves comparing the average duration of the bank's ________ to the average duration of its ________.
A) securities portfolio; non-deposit liabilities
B) assets; liabilities
C) loan portfolio; deposit liabilities
D) assets; deposit liabilities
Q:
Measuring the sensitivity of bank profits to changes in interest rates by multiplying the gap for several maturity subintervals times the change in the interest rate is called
A) basic gap analysis.
B) the maturity bucket approach to gap analysis.
C) the segmented maturity approach to gap analysis.
D) the segmented maturity approach to interest-exposure analysis.
Q:
If a bank has ________ rate-sensitive assets than liabilities, then ________ in interest rates will increase bank profits.
A) more; a decline
B) more; an increase
C) fewer; an increase
D) fewer; a surge