Question 1

Interstate banking regulations presently allow commercial banks to acquire other banks in their region of the country, but not to expand across the nation.

Accepted Answer

A) True 
 B)False

Question 2

In a revolving credit loan, the bank typically charges businesses a commitment fee on any unused funds.

Accepted Answer

A) True 
 B)False

Question 3

A bank's uses of funds represent liabilities of a bank.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A)  issuing bonds
B)  the federal funds market
C)  repurchase agreements
D)  borrowing from the Federal ReserveE) B) and C)
F) A) and B) A

Question 5

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.

Accepted Answer

A)  retail CD
B)  negotiable CD
C)  market CD
D)  protective CDE) A) and C)
F) C) and D)

Question 6

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

Accepted Answer

A)  purchased; asset
B)  sold; liability
C)  purchased; liability
D)  purchased; asset AND sold; liabilityE) B) and C)
F) None of the above

Question 7

When a bank engages in proprietary trading, it

Accepted Answer

A)  uses its own funds to make investments.
B)  is not subject to regulations.
C)  lends the funds in the federal funds market.
D)  normally uses the funds to build its capital.E) C) and D)
F) B) and D)

Question 8

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

Accepted Answer

A) True 
 B)False  False

Question 9

The interest rate charged on loans between depository institutions is commonly referred to as the

Accepted Answer

A)  federal funds rate.
B)  discount rate.
C)  primary credit rate.
D)  None of these are correct.E) None of the above
F) A) and C)

Question 10

Which of the following is true in regard to money market deposit accounts?

Accepted Answer

A)  MMDAs specify a maturity.
B)  MMDAs offer limited check-writing privileges.
C)  MMDAs are less liquid than retail CDs.
D)  MMDAs require no minimum balance.E) A) and B)
F) All of the above B

Question 11

The five largest banks in the United States account for about one-tenth of all assets in U.S. banks.

Accepted Answer

A) True 
 B)False

Question 12

Bank capital represents funds obtained through ____ and through ____.

Accepted Answer

A)  issuing stock; offering long-term CDs
B)  issuing repurchase agreements; issuing bonds
C)  issuing stock; retaining earnings
D)  offering long-term CDs; issuing bondsE) A) and B)
F) All of the above

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Proprietary trading is generally less risky than a bank's lending operations.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is NOT correct?

Accepted Answer

A)  The five largest U.S. banks now account for more than 50 percent of bank assets.
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.E) A) and D)
F) None of the above

Question 17

The yield on repurchase agreements is slightly higher than the federal funds rate at any given point in time.

Accepted Answer

A) True 
 B)False

Question 18

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 and then buys them back shortly thereafter, this is a

Accepted Answer

A)  federal funds loan.
B)  loan through the Federal Reserve's lending facility.
C)  repurchase agreement.
D)  commercial paper transaction.E) A) and C)
F) A) and B)

Question 19

____ is (are) NOT a major source of funds for commercial banks.

Accepted Answer

A)  Deposit accounts
B)  Borrowed funds
C)  Commercial loans
D)  Bank capitalE) B) and D)
F) B) and C)

Question 20

A single loan in the federal funds market is usually for ____; when a bank sells a single repurchase agreement, the maturity is usually ____.

Accepted Answer

A)  just a few days; one year or more
B)  several weeks; one year or more
C)  several weeks; just a few days
D)  just a few days; just a few daysE) A) and D)
F) A) and C)

Exam 17: Commercial Bank Operations

Interstate banking regulations presently allow commercial banks to acquire other banks in their region of the country, but not to expand across the nation.

Correct AnswerverifiedShow Answer

In a revolving credit loan, the bank typically charges businesses a commitment fee on any unused funds.

Correct AnswerverifiedShow Answer

A bank's uses of funds represent liabilities of a bank.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedA

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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a bank engages in proprietary trading, it

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedFalse

The interest rate charged on loans between depository institutions is commonly referred to as the

Correct AnswerverifiedShow Answer

Which of the following is true in regard to money market deposit accounts?

Correct AnswerverifiedB

The five largest banks in the United States account for about one-tenth of all assets in U.S. banks.

Correct AnswerverifiedShow Answer

Bank capital represents funds obtained through ____ and through ____.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Proprietary trading is generally less risky than a bank's lending operations.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements is NOT correct?

Correct AnswerverifiedShow Answer

The yield on repurchase agreements is slightly higher than the federal funds rate at any given point in time.

Correct AnswerverifiedShow Answer

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 and then buys them back shortly thereafter, this is a

Correct AnswerverifiedShow Answer

____ is (are) NOT a major source of funds for commercial banks.

Correct AnswerverifiedShow Answer

A single loan in the federal funds market is usually for ____; when a bank sells a single repurchase agreement, the maturity is usually ____.

Correct AnswerverifiedShow Answer

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A

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

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False

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B

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Bank capital represents funds obtained through and through .

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A single loan in the federal funds market is usually for ; when a bank sells a single repurchase agreement, the maturity is usually .

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