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A study of history shows that one of the first services offered by banks was: Currency exchange
Banks perform the indispensable task of intermediating between surplus-spending parties and deficit-spending parties
Smaller, locally focused commercial and savings banks that offer narrower but more personalized menu of financial services are known as community banks
a bank that wires funds for the purchase of a beach house in SC for a customer in OK is carrying out the ____ of banks payment role
a bank which manages the investment portfolio and pays the bills of an elderly customer who is unable to do it for himself is carrying out the _____ of banks agency role
the phenomenon of convergence refers to financial service firms expanding into other product lines
the US government wants to prevent money laundering by drug cartels. To promote this goal, they have asked banks to report any cash deposits greater than $10,000 to the government. Which of the following roles in the bank performing? policy role
alexander phua goes to his local bank and gets an insurance policy that protects him against loss in case he is in a car accident. which role is the bank performing? risk management role
which of the following is not a purpose of bank-regulation guarantee minimal profitability of the banking system
an institutional arrangement in which federal and state authorities both have significant bank regulatory powers is referred to as dual banking system
the federal law that prohibited federally supervised commercial banks from offering investment banking services in privately issues securities is known as the glass-stegall act
the federal reserve policy tool under which the Fed attempts to bring psychological pressure to bear on individuals and institutions to confirm to the Fed's policies using letters, phone calls, and speeches is known as the moral suasion
the 1994 law that allowed bank holding companies to acquire banks anywhere in the us is the riegle-neal interstate banking and branching efficiency act
the law that allows banks to affiliate with insurance companies and securities firms to form financial services conglomerates is the gramm-leach-blilet act (financial services modernization act)
the equivalent of the federal reserve system in Europe is known as the European central bank
the 1977 act that prevents banks from "redlining" certain neighborhoods, refusing to serve those areas is the community reinvestment act
one of the earliest theories regarding the impact of regulation on banks was developed by George Stigler. He contents that: firms in regulated industries actually seek out regulations because they bring monopolistic rents
Samuel Pelzman had a different view to Stigler on the impact of regulation on banks. He contends that: regulations shelter firms from changes in demand and cost, lowering its risk
There is an important debate raging today regarding whether banks should be regulated at all. George Benston contends that: depository institutions should be regulated no differently than any other corporation with no subsidies or special privileges
the federal reserve buys treasury bills in the open market. This will tend toL increase the available for use funds with banks and dealers involved in the transaction
the ratio of a bank's interest income from its loans and security investments less interest expenses on debt issue, divided by total earning assets measures a banks: net interest margin
the tax-management efficiency ratio consists of: net income over pre-tax net operating income
the earnings spread for a bank is equal to: total interest income divided by total earning assets less total interest expense divided by total interest-bearing bank liabilities.
a banks stock price will tend to rise if: value of the stream of future stockholder dividends is expected to increase
ROE for a bank is calculated by: dividing net after-tax income by total equity capital
a banks ROE equals its ROA times is: total assets divided by total equity capital
each of the following falls into the category of banks assets except: demand deposits
ROE for a bank indicates the rate of return flowing to the shareholders of the bank
______ is calculated by deducting noninterest expense and provision for loan losses from noninterest income Net noninterest income
a abnk sells shares of its common stock with a par value of $100 for $200 in the market. which two accounts on the banks balance sheet are going to be affected: common stock outstanding and surplus accounts
the noncash expense item on a banks report of income designed to shelter a banks current earnings from taxes and to help prepare for a bad loan is called provision for possible loan losses
when a loan is considered uncollectible, the banks accounting department will write it off the books by reducing the ____ and the ___ accounts. ALL, gross loans
The difference between such sources of bank income as service charges on deposits and trust-service feeds, and such sources of bank expenses as salaries and wages and overhead expenses divided by total assets or total earning assets is called: net noninterest margin
the risk that a financial institution may be forced to borrow emergency funds excessive cost to cover its immediate cash needs is: liquidity risk
which of the following would be the best example of a ratio used to examine a banks interest rate risk? interest sensitive assets/interest sensitive liabilities
banks depend heavily upon borrowed funds supplied by customers with little owners capital invested. this means that banks make heavy use of: financial leverage
the use fixed assets, rather than financial assets, in order to increase the operating earnings is known as: operating leverage
an example of a contra-asset account is: loan and lease loss allowance
nonperforming loans are credits on which any scheduled loan repayments and interest payments are past due for more than: 90 days
a banks temporary lending of excess reserves to other banks is labeled on the balance sheet as: fed funds sold
a financial institution that sells a particular futures contract and later purchases the same contract back is executing: a short hedge
a bank that goes short in the futures market: is obligated to make a delivery of the underlying security at the contract price
a financial institution that uses a long hedge is most likely: trying to avoid lower than expected yields from loans and securities
a significant limitation to financial futures as in interest-rate hedging device is a special form of risk known as ___ risk: basis
a financial institution that buys a put option: has the right to accept delivery of the underlying security at the contact
a bank seeking to avoid lower than expected yields from loans and security investments is most likely to use: a short position or selling hedge in futures
a bank that uses a short hedge is most likely: trying to avoid higher borrowing costs or trying to avoid declining asset values
a call option on Eurodollar deposit futures is most likely to be used by a bank to: offset a negative duration gap
a financial institution that goes long in the futures market: is obligated to make delivery of the underlying security at the contract price
an interest rate collar combines a rate floor and a rate cap into on agreement
which of the following is an advantage of trading financial futures to hedge interest-rate risk? only a fraction of the value of the contract must be pledged as collateral and brokers' commissions are relatively low
a put option on Eurodollar deposit futures is most likely to be used by a bank to: none of the above
interest rate capts protect the borrower from rising interest rates
interest rate swaps can change exposure to interest-rate fluctuations
the floating-rate payer in a swap would most likely want to buy and interest-rate: cap
the amount of initial margin, the settlement price, and other rules regarding trading futures contracts are determined by the: clearinghouse
a bank that buys a call option: has the right to accept delivery of the underlying security at the contract price if they wish
a bank wishing to avoid a higher borrowing cost is most likely to use: a short position or selling hedge in futures
when an investor first purchases or sells a futures contract, she must make a deposit on the exchange. this is called the: initial margin
the daily settlement process that credits or deducts losses from a futures customer's account is: marketing-to-market
Created by: kdawg1092