Commercial Bank Operations

PDFaid.Com #1 Pdf Solutions Which of the following statements is incorrect? 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 these statements are correct. _______ are offered to bank customers who desire to write checks against their account. Which type of savings account transfers funds to a checking account when checks are written? The banking industry has become less concentrated in recent years. Demand deposit accounts ATS A _______ account provides checking services as well as interest. Negotiable Order of Withdrawal (NOW) "Bull market" CDs reward depositors: if the stock market performs well A _______ CD is a time deposit offered by some large banks to corporations, with a specific maturity date, minimum deposit of $100,000 or more, and a secondary market. he level of large time deposits is _______ that of small time deposits. negotiable much more volatile than Money market deposit accounts differ from conventional time deposits in that they: offer limited check writing privileges. The intent of federal funds transactions is to: correct short term fund imbalances experienced by banks. The federal funds rate is generally _______ the Treasury bill rate. between .25 percent and 1.00 percent above Obtaining funds through _______ is not a common way for banks to satisfy a temporary deficiency of funds. The primary credit lending rate is now set at a level above the federal funds rate. (T/F) 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: issuing bonds True resolve temporary shortages of funds experienced by banks. repurchase agreement borrow in the federal funds market Subordinated notes and debentures are examples of: secondary capital All other things equal, when banks issue new stock, they: dilute the ownership of the bank As a source of funds, small banks rely more heavily on _______, and larger banks rely more heavily on _______. savings and time deposits; foreign deposits and short term borrowings Cash held _______ represents the major portion of a bank's required reserves. The main use of bank funds is for: in bank's vault loans Bank loans designed to support a firm's ongoing business operations are called _______ loans. _______ loans are primarily used to finance the purchase of fixed assets. Which of the following is most appropriate for a business that may experience a sudden need for funds but does not know precisely when? A _______ loan may be especially appropriate when the bank wishes to avoid adding more debt to its balance sheet. he interest rate banks charge their most creditworthy customers is known as the _______ rate. Working Capital Term informal line of credit direct lease prime Transaction deposits include: NOW accounts and Demand deposits When comparing Treasury securities and government agency securities: government agency securities are subject to default risk. Money market deposit accounts (MMDAs): allow a limited number of checks to be written against the account. Which of the following accounts does not allow checks (at least a limited amount) to be written? Banks sometimes need funds and sometimes have excess funds available. Which of the following is commonly a source of bank funds and a use of bank funds? retail CDs federal funds When a bank obtains funds through a _______, the provider of the funds receives collateral. When banks obtain funds in the federal funds market, the providers of the funds are: A single loan in the federal funds market is usually for _______; when a bank sells a single repurchase agreement, the maturity is usually _______. The interest rate charged on loans between depository institutions is commonly referred to as the _______ rate. The interest rate charged on loans from the Federal Reserve to banks is commonly referred to as the _______ rate. Repurchase agreement other depository institutions just a few days; just a few days federal funds primary credit lending The primary credit lending rate is determined by: The Federal Reserve Bank capital represents funds obtained through _______ and through _______. issuing stock; retaining earnings Banks sometimes prefer to minimize their amount of capital since: they try to avoid diluting ownership of the bank. When a bank obtains funds through _______, households are not a common provider of the funds. Which of the following is not an off-balance sheet activity? NCDs highly leveraged transactions (HLTs) _______ are the largest bank source of funds (as a percentage of total liabilities). Savings deposits (including MMDAs) Which of the following is not true regarding electronic funds transfer (EFT)? In point-of-sale transactions, EFT increases the number of transactions by check, credit card, and cash. _______ CDs allow the issuer to force an early maturity. _______ are full service banking offices that can compete directly with other banks located in that area. Edge Act corporations _______ constrained by existing regulations against interstate banking. Their deposits _______ be specifically related to international trans¬actions. Callable Branches are not; must Deposits in foreign branches of U.S. banks are: Protective covenants impose conditions in which the bank must provide additional loans to a borrower to protect the borrower from going bankrupt. (T/F) Commercial banks have expanded in recent years not only by acquiring other banks but also by acquiring other types of financial service firms. (T/F) Commercial banks can be a lender or a borrower when using repurchase agreements and loans in the federal funds market. (T/F) The operations, management, and regulation of a financial conglomerate are the same irrespective of the types of services offered. (T/F) Not insured by the FDIC False True True False Because U.S. dollars are widely used as an international medium of exchange, the Eurodollar market is very active. (T/F) A bank's uses of funds represent liabilities of a bank. (T/F) A bank's sources of funds represent liabilities or equity of the bank. (T/F) True False True