Commercial Bank Operations

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Question 1
Free
Multiple Choice

Which of the following statements is incorrect?

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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.

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Question 2
Free
True/False

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

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True

False

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Question 3
Free
True/False

A commercial bank can be a lender or a borrower when using repurchase agreements and loans in the federal funds market.

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True

False

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Question 4
Free
True/False

The operations, management, and regulation of a commercial bank are the same irrespective of the types of services offered.

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True

False

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Question 5
Free
True/False

A financial institution is likely to call a callable CD before its maturity if interest rates have risen since the CD was issued

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True

False

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Question 6
Multiple Choice

____ account provides checking and debit card services as well as interest.

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A
demand deposit
B
negotiable order of withdrawal (NOW)
C
passbook savings
D
time deposit
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Question 7
True/False

Protective covenants impose conditions that require the bank to provide additional loans to a borrower to protect the borrower from going bankrupt.

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True
False
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Question 8
Multiple Choice

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

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A
retail CD
B
negotiable CD
C
market CD
D
protective CD
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Question 9
True/False

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

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True
False
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Question 10
Multiple Choice

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

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A
specify a maturity.
B
offer limited check-writing privileges.
C
are less liquid.
D
none of the above
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Question 11
Multiple Choice

For any given bank, federal funds ____ represent a(n) ____ .

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A
purchased; asset
B
sold; liability
C
purchased; liability
D
A and B
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Question 12
Multiple Choice

The federal funds rate is ____ the yield on a Treasury security with a similar term remaining until maturity.

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A
substantially above
B
substantially below
C
close to
D
none of the above; the rate is much higher than the Treasury yield in some periods and much lower than the Treasury yield in other periods
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Question 13
Multiple Choice

Obtaining funds through ____ is not a common way for banks to satisfy a temporary deficiency of funds.

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A
issuing bonds
B
the federal funds market
C
repurchase agreements
D
borrowing from the Federal Reserve
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Question 14
Multiple Choice

The Federal Reserve provides loans to banks in order to

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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
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Question 15
Multiple Choice

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

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A
federal funds loan.
B
discount window loan.
C
repurchase agreement.
D
commercial paper transaction.
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Question 16
Multiple Choice

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

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A
issue bonds and then call them.
B
issue stock and then repurchase it.
C
borrow in the federal funds market.
D
issue NCDs.
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Question 17
Multiple Choice

All other things being equal, when banks issue new stock, they

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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
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Question 18
Multiple Choice

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

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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
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Question 19
Multiple Choice

The main use of bank funds is for

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A
loans
B
investment securities.
C
fixed assets.
D
repurchase agreements.
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Question 20
Multiple Choice

____ loans are primarily used to finance the purchase of fixed assets.

Choose correct answer/s
A
Term
B
Working capital
C
Informal line of credit
D
Revolving credit
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