Which of the following are transaction deposits?

C) Negotiable order of withdraw accounts

B) Small-denomination time deposits

Which of the following is not a nontransaction deposit?

C) Negotiable order of withdrawal accounts

B) Small-denomination time deposits

Because ________ are less liquid for the depositor than ________, they earn higher interest rates.

C) passbook savings; checkable deposits

A) money market deposit accounts; time deposits

B) checkable deposits; passbook savings

D) passbook savings; time deposits

Because ________ are less liquid for the depositor than ________, they earn higher interest rates.

D) time deposits; passbook savings

A) passbook savings; time deposits

B) money market deposit accounts; time deposits

C) money market deposit accounts; passbook savings

Banks acquire the funds that they use to purchase income-earning assets from such sources as

A) cash items in the process of collection

Bank capital is equal to ________ minus ________.

A) total assets; total liabilities

D) total liabilities; total borrowings

C) total assets; total reserves

B) total liabilities; total assets

Bank reserves include

C) vault cash and deposits at the Fed.

D) deposits at other banks and deposits at the Fed

B) vault cash and short-term Treasury securities.

A) deposits at the Fed and short-term treasury securities.

Which of the following are not reported as assets on a bankʹs balance sheet?

A) Cash items in the process of collection

Through correspondent banking, large banks provide services to small banks, including

B) foreign exchange transactions.

The largest percentage of banksʹ holdings of securities consist of

A) Treasury and government agency securities.

C) state and local government securities.

B) tax-exempt municipal securities.

Which of the following bank assets is the most liquid?

C) Cash items in process of collection

Secondary reserves include

C) short-term Treasury securities.

D) state and local government securities.

A) deposits at Federal Reserve Banks.

B) deposits at other large banks.

Secondary reserves are so called because

A) they can be converted into cash with low transactions costs.

D) they rank second to bank vault cash in importance of bank holdings

C) 50% of these assets count toward meeting required reserves.

B) they are not easily converted into cash, and are, therefore, of secondary importance to banking firms.

Banksʹ asset portfolios include state and local government securities because

A) their interest payments are tax deductible for federal income taxes.

D) there is no default-risk with state and local government securities.

C) the Federal Reserve requires member banks to buy securities from state and local governments located within their respective Federal Reserve districts.

B) banks consider them helpful in attracting accounts of Federal employees.

The most important category of assets on a bankʹs balance sheet is

D) cash items in the process of collection.

Which of the following are bank assets?

A) the building owned by the bank

D) a customerʹs checking account

Asset transformation can be described as

B) borrowing short and lending long.

D) borrowing and lending for the long term.

C) borrowing and lending only for the short term.

A) borrowing long and lending short.

When you deposit a $50 bill in the Security Pacific National Bank,

D) its cash items in the process of collection increase by $50.

C) its reserves decrease by $50.

A) its liabilities decrease by $50.

When you deposit $50 in currency at Old National Bank,

C) its liabilities increase by $50.

D) its liabilities decrease by $50.

A) its assets increase by less than $50 because of reserve requirements.

B) its reserves increase by less than $50 because of reserve requirements.

Holding all else constant, when a bank receives the funds for a deposited check,

A) cash items in the process of collection fall by the amount of the check.

D) bank reserves increase by the amount of required reserves

C) bank liabilities decrease by the amount of the check.

B) bank assets increase by the amount of the check.

When a $10 check written on the First National Bank of Chicago is deposited in an account at Citibank, then

C) the liabilities of Citibank increase by $10.

D) the assets of Citibank fall by $10.

A) the liabilities of the First National Bank increase by $10.

B) the reserves of the First National Bank increase by $ 10.

When a $10 check written on the First National Bank of Chicago is deposited in an account at Citibank, then

A) the liabilities of the First National Bank decrease by $10.

B) the reserves of the First National Bank increase by $10.

C) the liabilities of Citibank decrease by $10.

D) the assets of Citibank decrease by $10.

When you deposit $50 in your account at First National Bank and a $100 check you have written on this account is cashed at Chemical Bank, then

C) the reserves at First National fall by $50.

A) the assets of First National rise by $50.

B) the assets of Chemical Bank rise by $50.

D) the liabilities at Chemical Bank rise by $50.

When $1 million is deposited at a bank, the required reserve ratio is 20 percent, and the bank chooses not to hold any excess reserves but makes loans instead, then, in the bankʹs final balance sheet,

B) the liabilities of the bank increase by $1,000,000.

A) the assets at the bank increase by $800,000.

C) the liabilities of the bank increase by $800,000.

D) reserves increase by $160,000.

When $1 million is deposited at a bank, the required reserve ratio is 20 percent, and the bank chooses not to make any loans but to hold excess reserves instead, then, in the bankʹs final balance sheet,

A) the assets at the bank increase by $1 million.

D) liabilities increase by $200,000.

C) reserves increase by $200,000.

B) the liabilities of the bank decrease by $1 million.

Using T-accounts show what happens to reserves at Security National Bank if one individual deposits $1000 in cash into her checking account and another individual withdraws $750 in cash from her checking account.

Security National Bank Security National Bank Assets Liabilities Reserves +$250 Checkable deposits +$250

Which of the following are primary concerns of the bank manager?

A) Maintaining sufficient reserves to minimize the cost to the bank of deposit outflows

B) Extending loans to borrowers who will pay low interest rates, but who are poor credit risks

C) Acquiring funds at a relatively high cost, so that profitable lending opportunities can be realized

D) Maintaining high levels of capital and thus maximizing the returns to the owners

Chapter 10

Quiz

•

English

•

University

•

Practice Problem

•

Hard

l h

FREE Resource

C) 25 percent; 50 percent

D) 50 percent; 30 percent

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Which of the following statements are true?

Which of the following statements is false?

Which of the following are reported as liabilities on a bankʹs balance sheet?

Which of the following are reported as liabilities on a bankʹs balance sheet?

The share of checkable deposits in total bank liabilities has

Which of the following statements is false?

In recent years the interest paid on checkable and time deposits has accounted for around ________ of total bank operating expenses, while the costs involved in servicing accounts have been approximately ________ of operating expenses.

Which of the following statements are true?

Because checking accounts are ________ liquid for the depositor than passbook savings, they earn ________ interest rates.

Which of the following are transaction deposits?

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In recent years the interest paid on checkable and time deposits has accounted for around of total bank operating expenses, while the costs involved in servicing accounts have been approximately of operating expenses.

Because checking accounts are liquid for the depositor than passbook savings, they earn interest rates.