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Banking
Q:
Under current federal law, commercial banks in the United States can issue commercial paper as direct obligations of the banks.
Q:
CDs sold by some of the largest foreign banks active in the United States through their branches are called Yankee CDs.
Q:
According to the FDIC Improvement Act, undercapitalized U.S. banks cannot be granted discount window loans for more than 60 days in each 120-day period.
Q:
The most common type of Federal funds loans are term loans.
Q:
Liability management banking calls for using price (the interest rate offered) as the control lever to regulate incoming funds.
Q:
Funds raised by the use of liability management techniques are considered to be flexible.
Q:
Liability management is considered to be an interest-sensitive approach to raising bank funds.
Q:
The volume of variable-rate CDs exceeds the volume of fixed-rate CDs among U.S. banks.
Q:
Yankee CDs are issued by savings and loan associations and other nonbank savings institutions.
Q:
The loan from a Federal Reserve bank which normally lasts only a few days and is designed to provide immediate aid in meeting a bank's legal reserve requirement is known as extended credit.
Q:
Loans of Federal funds under a continuing contract are automatically renewed each day unless either the borrower or the lender decides to end the agreement.
Q:
Accommodating banks buy and sell Federal funds simultaneously to make a market for the reserves of its customer institutions.
Q:
There are no reserve requirements on Federal funds borrowings in the U.S.
Q:
Federal funds today consist exclusively of deposits held at the Federal Reserve banks.
Q:
In recent years, deposits have been growing faster than nondeposit sources of funds among U.S. banks.
Q:
Asset management is regarded as an interest-sensitive approach to raising funds.
Q:
The traditional and principal source of bank funds is deposits.
Q:
The ___________________________ System provides access to nondeposit borrowings to depository institutions. These borrowings are fully collateralized by home mortgages and have maturities ranging from overnight to 20 years.
Q:
When financial institution borrows in the RP market, this loan is listed as _________________________ under agreements to repurchase.
Q:
One of the three types of loans in the Fed Funds market, __________________ contracts are automatically renewed each day unless either the borrower or lender decides to end this agreement.
Q:
Federal Reserve balances of banks can be transferred from one institution to another in seconds through the Fed's wire transfer network called the ______________________.
Q:
The type of discount window loan with generally the lowest rate of interest is known as __________ credit.
Q:
The type of discount window loan available at higher interest rates to depository institutions not qualifying for primary credit is known as ___________ credit.
Q:
A ______________ repurchase agreement (RP) is one in which the underlying collateral is not identified precisely and thus allows some substitution at the time of delivery.
Q:
A repurchase agreement (RP) whereby the collateral is specifically identified is known as a conventional or ____________ RP.
Q:
Repurchase Agreements (RPs) are very similar to Federal funds and are often viewed as ____________ Federal funds transactions.
Q:
Common nondeposit borrowings of a bank are _____-term rather than ______-term debt.
Q:
The securities most often used in a repurchase agreement are ____________________.
Q:
For a bank with immediate reserve requirements, a viable alternative to Fed funds market and RPs is to use the _______________ window operated by the Federal Reserve to provide loans.
Q:
The danger that a bank in need of funds will not be able to find someone willing to grant a loan at a reasonable rate, is known as _________________________ risk.
Q:
A(n) _________________________ is an interest bearing receipt for funds issued by a bank with a minimum denomination of $100,000.
Q:
The spread between current and expected loans and investments and the current and expected inflows from deposits and other sources of funds is known as the __________.
Q:
Volatility in funding and credit costs to banks due to fluctuating supply and demand conditions in the market is known as __________________ risk.
Q:
A _________________________ is a temporary sale of high-quality, easily-liquidated assets accompanied by an agreement to buy back those assets on a future specific date at a predetermined price.
Q:
_________________________ are short-term notes, with maturities ranging from 3 days to 9 months, issued by well-known companies.
Q:
Originally, __________________ funds consisted exclusively of deposits held by U.S. banks at the Federal Reserve banks which were loaned from one bank to another.
Q:
When the first priority of a bank is to make loans to all good quality loan customers it is following the _________________________ doctrine.
Q:
When a bank buys funds from other financial institutions in order to cover good quality loan demand and to satisfy deposit reserve requirements, it is practicing _________________________ management.
Q:
The CDs that large foreign banks sell through their U.S. branches are called ________________________.
Q:
Dollar-denominated CDs issued outside the U.S. are called ______________________.
Q:
_________________________ is a way of pricing deposit services in which the rate, or return, or the fees charged on the deposit accounts are based on the cost of offering the service plus a profit margin.
Q:
Some people feel that everyone is entitled access to a minimum level of financial service, no matter what their income level is. This issue is called the issue of ________________________.
Q:
_________________________ are a stable base of deposited funds that are not highly sensitive to movements in market interest rates and tend to remain with the depository institution.
Q:
_________________________ are designed to attract funds from customers who wish to set aside money in anticipation of future expenditures or financial emergencies.
Q:
A(n) _________________________ is a short-maturity deposit which pays a competitive interest rate. Only six preauthorized drafts per month are allowed but only three withdrawals can be made by writing checks.
Q:
A(n) _________________________ is an interest bearing checking account that gives the offering bank the right to insist on prior notice before customer withdrawals can be honored.
Q:
A(n) _________________________ requires a bank to honor withdrawals immediately upon request.
Q:
In determining the balance on which interest earnings are figured, a depository institution must use the ___________________ in the deposit.
A. minimum balance amount
B. maximum balance amount
C. full amount of the principal
D. average monthly balance
E. average daily balance
Q:
The degree of risk exposure, based on which the amount of insurance premiums paid by each FDIC-insured depository is determined, is an interplay of two factorsrisk class to which the institution belongs to and:
A. capital adequacy
B. net non-performing assets
C. gross non-performing assets
D. percentage of total liabilities hedged
E. open swap exposures
Q:
While demand deposits have about the same gross expenses per dollar of deposit as time deposits do, the _____________ levied against transaction account customers help to lower the net cost of checkable deposits.
A. higher account opening fees
B. higher service fees
C. higher pre-closure fees
D. lower interest rates
E. less number of services
Q:
When the government collects taxes or sells Treasuries, it usually directs these funds into TT&L deposits first:
A. as per the directions of the supreme court.
B. to repay for the money borrowed earlier.
C. to minimize the impact of operations on the financial system.
D. to decrease the money supply in the economy.
E. to neutralize the impact of operations on the financial system.
Q:
According to the textbook, one of the reasons why large banks in the recent years have acquired many smaller banking firms is:
A. to avoid stringent regulatory norms.
B. to gain access to more stable and less expensive deposits.
C. to increase their credit ratings.
D. to increase their geographical presence.
E. to diversify their customer base.
Q:
Returns on certificates of deposits linked to performance of stock markets are known as:
A. equity CDs.
B. stock CDs.
C. market CDs.
D. index CDs.
E. exchange CDs.
Q:
Recently, time deposits have been issued with interest rates adjusted periodically (such as every 90 days). This time period is known as:
A. roll period.
B. maintenance period.
C. computation period.
D. maturity period.
E. reserve period.
Q:
Offering institutions post lower yields on SNOWs than on MMDAs because:
A. ratings on institutions issuing SNOWs are higher.
B. SNOWs can be drafted more frequently by customers.
C. federal regulatory authorities classify MMDAs as transaction deposits.
D. MMDAs carry unlimited check-writing privileges.
E. MMDAs have longer maturities than SNOWs.
Q:
_____________________ permits a customer to preauthorize a depository institution to move funds from a savings account to a transaction account in order to cover overdrafts.
A. Automatic transfers (ATS)
B. Sweep account
C. NOW account
D. SNOW account
E. MMDA
Q:
A bank expects to raise $20 million in new money if it pays a deposit rate of 7%, $60 million in new money if it pays a deposit rate of 7.5%, $100 million in new money if it pays a deposit rate of 8%, and $120 in new money if it pays a deposit rate of 8.5%. The bank expects to earn 9.5% on all money that it receives in new deposits. What is the marginal cost of deposits if the bank raises their deposit rate from 7.5% to 8%?
A. 11%
B. 8.75%
C. 7.75%
D. 7%
E. 0.5%
Q:
According to the textbook, business (commercial) transaction accounts are generally more profitable than personal checking accounts. Which of the following explains the reason(s) behind this statement?
A. The average size of a business transaction is smaller than a personal transaction.
B. Interest expenses associated with a commercial deposit transaction are higher.
C. The bank receives less investable funds in the commercial deposit transactions.
D. The average size of a business transaction is smaller than a personal transaction and interest expenses associated with commercial deposit transactions are higher.
E. Interest expenses associated with commercial deposit transactions are lower and a bank receives more investable funds in the commercial deposits transactions.
Q:
Which of these Acts is attempting to address the low savings rate of workers in the U.S. by including an automatic enrollment ("default option") in employees' retirement accounts?
A. The Economic Recovery Tax Act of 1981
B. The Tax Reform Act of 1986
C. The Tax Relief Act of 1997
D. The Pension Protection Act of 2006
E. None of the options is correct
Q:
Under the Truth in Savings Act, a bank must inform its customers of the terms being quoted on their deposits. Which of the following is not one of the terms listed?
A. Interest rate information
B. Balance computation method
C. Early withdrawal penalty
D. Transaction limitations
E. Minimum balance requirements
Q:
A bank has $500 million in checking deposits with interest and non-interest costs of 6%, $250 million in savings and time deposits with interest and non-interest costs of 14%, and $250 million in equity capital with a cost of 25%. The bank has estimated that reserve requirements, deposit insurance fees and uncollected balances reduce the amount of money available on checking deposits by 15% and on savings and time deposits by 4%. What is the bank's before-tax cost of funds?
A. 15.00%
B. 12.75%
C. 13.29%
D. 15.74%
E. None of the options is correct
Q:
From an analysis on its deposits, a bank determines that account processing and other operating expenses cost the bank $4.15 per month. It has also determined that non-operating expenses on its deposits are $1.65 per month. The bank wants to have a profit margin which is 10 percent of monthly costs. What monthly fee should the bank charge on its deposit accounts?
A. $6.38 per month
B. $5.80 per month
C. $4.57 per month
D. $4.15 per month
E. None of the options is correct
Q:
A customer makes a savings deposit for 15 days. During that time he earns $15 in interest and maintains an average daily balance of $2,200. What is the annual percentage yield on the savings account?
A. 0.68%
B. 16.36%
C. 16.59%
D. 17.98%
E. None of the options is correct
Q:
Prior to Depository Institution Deregulation and Control Act (DIDMCA) being passed, banks used ______________. This tended to distort the allocation of scarce resources.A. free pricingB. conditionally free pricingC. flat-rate pricingD. marginal cost pricingE. nonprice competition
Q:
The deposit pricing method that focuses on the added cost of bringing in new funds is called:
A. free pricing.
B. conditionally free pricing.
C. flat-rate pricing.
D. marginal cost pricing.
E. nonprice competition.
Q:
A checking account price schedule that charges a fixed charge per check, or per period, or both is called:
A. free pricing.
B. conditionally free pricing.
C. flat-rate pricing.
D. marginal cost pricing.
E. nonprice competition.
Q:
A checking account price schedule characterized by absence of any monthly account maintenance fee or per-transaction fee is called:
A. free pricing.
B. conditionally free pricing.
C. flat-rate pricing.
D. marginal cost pricing.
E. nonprice competition.
Q:
The dominant holder of bank deposits in the U.S.:
A. is the private sector.
B. are state and local governments.
C. are foreign governments.
D. are foreign banks.
E. None of the options is correct.
Q:
Which of the following is a reason that has made IRA and Keogh accounts more attractive to depositors recently?
A. Most of these accounts carry floating interest rates
B. These accounts now represent more than half of total deposits of FDIC insured banks
C. Individuals can deposit unlimited amounts in these accounts
D. Banks need to pay at least 6% on these accounts to depositors
E. Increase in FDIC insurance coverage to $250,000 on these accounts
Q:
A time deposit that allows the depositor to withdraw some of the funds without a withdrawal penalty is called a:
A. negotiable CD.
B. bump-up CD.
C. step-up CD.
D. liquid CD.
E. None of the options is correct.
Q:
A time deposit that allows for a periodic upward adjustment to the promised rate is called a:
A. negotiable CD.
B. bump-up CD.
C. step-up CD.
D. liquid CD.
E. None of the options is correct.
Q:
A time deposit that is non-negotiable but allows a depositor to switch to a higher interest rate if market interest rates rise is called a:
A. negotiable CD.
B. bump-up CD.
C. step-up CD.
D. liquid CD.
E. None of the options is correct.
Q:
A time deposit that has a denomination greater than $100,000 and is generally for wealthy individuals and corporations is known as a:
A. negotiable CD.
B. bump-up CD.
C. step-up CD.
D. liquid CD.
E. None of the options is correct.
Q:
An account at a bank that carries a fixed maturity date, with a fixed interest rate, and which often carries a penalty for early withdrawal of money is called a:
A. demand deposit.
B. transaction deposit.
C. time deposit.
D. money market mutual deposit.
E. None of the options is correct.
Q:
A traditional savings account with transactions and balances evidenced by the entries recorded in a booklet kept by the customer is called:
A. passbook savings account.
B. statement savings plan.
C. negotiable order of withdrawal.
D. money market mutual fund.
E. None of the options is correct.
Q:
A savings account evidenced only by a computer entry for which the customer gets a monthly printout is called:
A. passbook savings account.
B. statement savings deposits.
C. negotiable order of withdrawal.
D. money market mutual fund.
E. None of the options is correct.
Q:
Deposits designed to attract customers who wish to set aside money in anticipation of future expenditures or financial emergencies are called:
A. drafts.
B. second-party payment accounts.
C. thrift deposits.
D. transaction accounts.
E. None of the options is correct.
Q:
Conditional deposit pricing may involve all of the following factors except:
A. the level of interest rates.
B. the number of transactions passing through the account.
C. the average balance in the account.
D. the maturity of the account.
E. All of the options are used.
Q:
A bank quotes an APY of 8%. A small business that has an account with the bank had $2,500 in their account for half the year and $5,000 in their account for the other half of the year. How much in total interest earnings did the business make during the year?
A. $300
B. $200
C. $400
D. $150
E. None of the options is correct
Q:
If you deposit $1,000 into a certificate of deposit that quotes you a 5.5% APY, how much will you have at the end of 1 year?
A. $1,050.00
B. $1,055.00
C. $1,550.00
D. $1,005.50
E. None of the options is correct.