Commercial Bank Operations

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Question 1

Free

Multiple Choice

Which of the following statements is incorrect?

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Banks have expanded their business across services over time.

Acquisitions have been a convenient method for banks to grow quickly and capitalize on economies of scale.

The banking industry has become less concentrated in recent years.

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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demand deposit

negotiable order of withdrawal (NOW)

passbook savings

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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retail CD

negotiable CD

market CD

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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specify a maturity.

offer limited check-writing privileges.

are less liquid.

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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purchased; asset

sold; liability

purchased; liability

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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substantially above

substantially below

close to

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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issuing bonds

the federal funds market

repurchase agreements

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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resolve permanent shortages of funds experienced by banks.

resolve temporary shortages of funds experienced by banks.

finance the shortages of funds of finance companies.

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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federal funds loan.

discount window loan.

repurchase agreement.

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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issue bonds and then call them.

issue stock and then repurchase it.

borrow in the federal funds market.

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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increase reported earnings per share.

decrease their ability to absorb operating losses.

dilute the ownership of the bank.

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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at other commercial banks

in a bank's vault

on deposit at the federal funds window

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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loans

investment securities.

fixed assets.

repurchase agreements.

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Question 20

Multiple Choice

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

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Term

Working capital

Informal line of credit

Revolving credit

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Commercial Bank Operations

Which of the following statements is incorrect?

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

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

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

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

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

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

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.

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

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

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

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

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

The Federal Reserve provides loans to banks in order to

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

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

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

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

The main use of bank funds is for

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

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