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Banking
Q:
A customer has a savings account for one year. During the year he earns $65.50 in interest. For 180 days he has $2,000 in the account and for another 180 days he has $1,000 in the account. What is the annual percentage yield on this savings account?
A. 6.55%
B. 3.28%
C. 4.42%
D. 8.73%
E. None of the options is correct
Q:
A financial institution that charges its customers based on the number of services they use and grants lower deposit fees or waives some fees for a customer that purchases two or more services is practicing:
A. marginal cost pricing.
B. conditional pricing.
C. relationship pricing.
D. upscale target pricing.
E. None of the options is correct.
Q:
According to recent studies cited in this chapter, in choosing a bank to supply their deposits and other services, which of the following factors do business firms rank first?
A. Quality of financial advice given
B. Financial health of lending institution
C. Whether loans are competitively priced
D. Whether cash management and operations services are provided
E. Quality of bank officers
Q:
According to recent studies cited in this book, in selecting a bank to hold their checking accounts, which of the following factors do household customers rank first?
A. Safety.
B. High deposit interest rates.
C. Convenient location.
D. Availability of other services.
E. Low fees and low minimum balance.
Q:
Depository institutions selling deposits to the public in the United States must quote the rate of return pledged to the owner of the deposit, which reflects the customer's average daily balance kept in the deposit. This quoted rate of return is known as:
A. annual percentage rate (APR).
B. annual percentage yield (APY).
C. daily deposit yield (DDY).
D. daily average return (DAR).
E. None of the options is correct.
Q:
The Federal law that requires U.S. depository institutions to make greater disclosure of the fees, interest rates, and other terms attached to the deposits they sell to the public is called the:
A. Consumer Credit Protection Act.
B. Fair Pricing Act.
C. Consumer Full Disclosure Act.
D. Truth in Savings Act.
E. None of the options is correct.
Q:
The deposit pricing method that favors large-denomination deposits because services are free if the deposit account balance stays above some minimum figure is called:
A. free pricing.
B. conditionally free pricing.
C. flat-rate pricing.
D. upscale target pricing.
E. marginal cost pricing.
Q:
Using deposit fee schedules that vary deposit prices according to the number of transactions, average balance in the deposit account, and maturity of the deposits represents which of the deposit pricing method listed below?
A. Marginal cost pricing
B. Cost plus pricing
C. Conditional pricing
D. Upscale target pricing
E. None of the options is correct.
Q:
The formulaoperating expense per unit of deposit service plus estimated overhead expense plus planned profit from each deposit service unit soldreflects which of the deposit pricing method listed below?
A. Marginal cost pricing
B. Cost plus pricing
C. Conditional pricing
D. Upscale target pricing
E. None of the options is correct
Q:
Some people feel that all individuals are entitled to some minimum level of financial services, no matter what their income level is. This issue is often called:
A. lifeline banking.
B. preference banking.
C. nondiscriminatory banking.
D. lifeboat banking.
E. None of the options is correct.
Q:
__________ are often the most profitable deposit services for a bank.
A. Time deposits
B. Transaction deposits
C. Thrift deposits
D. Passbook savings deposits
E. Certificates of deposits
Q:
The types of deposits that will be created by the banking system depend predominantly upon:
A. the level of interest rates.
B. the state of the economy.
C. the monetary policies of the central bank.
D. public preference.
E. None of the options is correct.
Q:
A deposit which offers flexible money market interest rates but is accessible for spending by writing a limited number of checks or executing preauthorized drafts is known as a(n):
A. demand deposit.
B. NOW account.
C. MMDA.
D. time deposit.
E. None of the options is correct.
Q:
Negotiable Order of Withdrawal (NOW) accountsinterest-bearing savings accounts that can be used essentially the same as checking accountswere authorized by:
A. Glass-Steagall Act.
B. Depository Institutions Deregulation and Monetary Control Act (DIDMCA).
C. Bank Holding Company Act.
D. Garn-St. Germain Depository Institutions Act.
E. None of the options is correct.
Q:
A stable and predictable base of deposited funds that is not highly sensitive to movements in market interest rates and tend to remain with the bank is called:
A. TT&L deposits.
B. core deposits.
C. consumer CDs.
D. correspondent deposits.
E. None of the options is correct.
Q:
Money market deposit accounts (MMDAs), offering flexible interest rates, accessible for payments purposes, and designed to compete with share accounts offered by money market mutual funds, were authorized by the:
A. Glass-Steagall Act.
B. Depository Institutions Deregulation and Monetary Control Act (DIDMCA).
C. Bank Holding Company Act.
D. Garn-St. Germain Depository Institutions Act.
E. None of the options is correct.
Q:
Interest payments on regular checking accounts were prohibited in the United States under terms of the:
A. Glass-Steagall Act.
B. McFadden-Pepper Act.
C. National Bank Act.
D. Garn-St. Germain Depository Institutions Act.
E. None of the options is correct.
Q:
Deposit accounts whose principal function is to make payments for purchases of goods and services are called:
A. drafts.
B. second-party payments accounts.
C. thrift deposits.
D. transaction accounts.
E. None of the options is correct.
Q:
Research indicates that at least half of all households and small businesses hold their primary checking account at a depository institution situated within 3 miles of their location.
Q:
Urban markets are more responsive to deposit interest rates and fees than rural markets.
Q:
The depository institutions which tend to have the highest deposit yields are credit unions.
Q:
There are still a number of existing problems with online bill-paying services which has limited its growth.
Q:
The total dollar value of checks paid in the United States has grown modestly in recent years.
Q:
Web-centered banks with little or no physical facilities are known as virtual banks.
Q:
When a bank temporarily offers higher than average interest rates or lower than average customer fees in order to attract new business, they are practicing conditional pricing.
Q:
Conditionally free deposits for customers mean that as long as the customers do not hold above a certain level of deposit, there are no monthly fees or per transaction charges.
Q:
According to recent studies cited in this chapter, the number one factor that households consider in choosing a bank to hold their savings deposit is location.
Q:
Under the Truth in Savings Act, customers must be informed of the impact of any early deposit withdrawals on the annual percentage yield they expect to receive from an interest-bearing deposit.
Q:
The Truth in Savings Act requires a bank to disclose to its deposit customers, the frequency with which interest is compounded on all interest-bearing accounts.
Q:
According to the text, no-fee savings accounts are on the decline.
Q:
Deposits are usually priced separately from loans and other bank services.
Q:
Nonprice competition for deposits has tended to distort the allocation of scarce resources in the banking sector.
Q:
A bank has full control over its deposit prices in the long run.
Q:
Competition lowers the expected return to a bank from putting its deposits to work.
Q:
Competition tends to raise deposit interest costs.
Q:
A Roth IRA allows an individual to accumulate investment earnings tax free and also pay no tax on their investment earnings when withdrawn provided the taxpayer follows the rules on this new account.
Q:
An MMDA is a short-term deposit where the bank can offer a competitive interest rate and which allows up to six preauthorized drafts per month.
Q:
NOW accounts can be held by businesses and individuals and are interest-bearing checking accounts.
Q:
Personal checking accounts tend to be more profitable for banks than commercial checking accounts.
Q:
Interest-bearing checking accounts, on average, tend to generate lower net returns for banks than regular (non-interest-bearing) checking accounts.
Q:
The availability of a large block of core deposits decreases the duration of a bank's liabilities.
Q:
In general, the longer the maturity of a deposit, the lower the yield a financial institution must offer to its depositors because of the greater interest-rate risk the bank faces with longer-term deposits.
Q:
IRA and Keogh deposits have great appeal for bankers principally because they can be sold bearing relatively low (often below-market) interest rates.
Q:
Demand deposits are among the most volatile and least predictable of a bank's sources of funds with the shortest potential maturity.
Q:
Excess legal reserves are the sources out of which new bank loans are created.
Q:
Domestic deposits generate legal reserves.
Q:
The contention that there are certain banking services (such as small loans or savings and checking accounts) that every citizen should have access to is usually called socialized banking.
Q:
Gradual phase-out of legal interest-rate ceilings on deposits offered by U.S. banks was first authorized by the Glass-Steagall Act.
Q:
Legally imposed interest-rate ceilings on deposits were first set in place in the United States after passage of the Bank Holding Company Act.
Q:
The implicit interest rate on checkable deposits equals the difference between the cost of supplying deposit services to a customer and the amount of the service charge actually assessed to that customer.
Q:
Deposits held by banks with others are called correspondent deposits.
Q:
According to the textbook, the U.S. Treasury keeps most of its operating funds in TT&L deposits.
Q:
The volume of core deposits at U.S. banks has been growing in recent years relative to other categories of deposits.
Q:
On October 28, 2004, ________________ became law, permitting depository institutions to electronically transfer check images instead of the checks themselves.
Q:
________________ is a process where merchants and utility companies take the information from a check an individual has just written, and electronically debit the individual's account instead of sending the check through the regular check clearing process.
Q:
________________ are accounts in domestic banking institutions where the U.S. Treasury keeps most of their operating funds.
Q:
Due to the fact that they may be perceived as more risky, ________________ banks generally offer higher deposit rates than traditional brick and mortar banks.
Q:
The _______________, which was created under Tax Relief Act of 1997, allows individuals to make non-tax-deductible contributions to a retirement fund that can grow tax free and also pay no taxes on their investment earnings when withdrawn.
Q:
________________ CDs allow the depositor to withdraw some funds without a withdrawal penalty.
Q:
________________ CDs permit periodic upward adjustments in promised interest rates.
Q:
__________ CDs allow depositors to switch to a higher interest rate if market interest rates rise.
Q:
For decades, depository institutions offered only one type of savings plan____________. One that could be opened with as little as $5 and withdrawal privileges were unlimited.
Q:
Research suggests that _________ -income consumers appear to be more influenced by the size of the financial institution.
Q:
Research suggests that a depository institution's location is most important to _____ -income consumers.
Q:
A(n) _________________________ is a retirement plan that is designed for self-employed individuals.
Q:
Depositors must send their customers the amount of interest earnings received, along with the _________________ earned. It is the interest rate the customer has actually earned on the account.
Q:
The _________________________ Act was passed in 1991 and specifies the information that institutions must disclose to their customers about deposit accounts.
Q:
A(n) _________________________ is a conditional method of pricing deposit services in which the fees paid by the customer depend mainly on the account balance and volume of activity.
Q:
A(n) _________________________ is a thrift account which carries a fixed maturity date and generally carries a fixed interest rate for that time period.
Q:
_________________________ is part of a new technology for processing checks where the bank takes a picture of the back and the front side of an original check and which can then be processed as if it were the original.
Q:
When a customer is charged based on the number and kinds of services used, with the customers that use a number of services being charged less or having some fees waived, this is called __________________ pricing.
Q:
When a customer is charged a fixed cost per check, per period, or both, it is called __________________ pricing.
Q:
_________________________ pricing is where a financial institution sets up a schedule of fees in which a customer pays a low or no fee if the deposit balance stays above some minimum level and pays a higher fee if the balance declines below that minimum level.
Q:
The _________________________ is the added cost of bringing in new funds.
Q:
When financial institutions tempt customers by paying postage both ways in bank-by-mail services or by offering free gifts such as teddy bears, they are practicing __________.
Q:
Recent research on money position management suggests that the reserve deficits of smaller depository institutions normally occur:
A. early in the reserve maintenance period.
B. early in the reserve computation period.
C. late in the reserve maintenance period.
D. late in the reserve computation period.
E. during low credit demand periods.
Q:
The base amount of transaction deposits for a depository institution above which the legal reserve requirement changes to ten percent is known as:
A. reserve base.
B. reserve tranche.
C. base limit.
D. limit tranche.
E. cut-off tranche.
Q:
While the largest U.S. depositories are required to settle their legal reserve requirements with the Federal Reserve over successive bi-weekly periods, the more numerous but smaller banks are required to do so:
A. once every day.
B. once every week.
C. once every month.
D. once every quarter.
E. once every year.
Q:
_____________ indicators tend to be highly sensitive to the season of the year and stage of the business cycle.
A. Stored liquidity
B. Purchased liquidity
C. Balanced liquidity
D. Asset liquidity
E. Liability liquidity
Q:
The most important source of liquidity for a depository institution is:
A. Federal funds loan.
B. new customer deposits.
C. sale of liquid securities.
D. money market loans.
E. sale of equity.