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Bus 206 final
Bus 206 Final: chapter 17
| Question | Answer |
|---|---|
| what has the decrease in number of banks over time caused? | an increase in concentration in the banking industry |
| types of transaction deposits? | demand deposit, negotiable order of withdrawal |
| also known as a checking account; offered to customers who desire to write checks against their account; requires small minimum balance | demand deposit |
| pays interest as well as providing checking services | negotiable order of withdrawal |
| passbook saving account; does not permit check writing | savings deposits |
| deposits that cant be withdrawn until a specified maturity date | time deposits |
| requires a specified minimum amount of funds to be deposited for a specified period of time | certificates of deposit |
| similar to retail CDs; short maturities; minimum deposit of $100,000 | negotiable certificate of deposit |
| no specific maturity date; more liquid than CDs but offer a lower interest rate; limited check-writing ability, require a larger minimum balance, and offer a higher yield | money market deposit accounts |
| liability to borrowing bank, typically 1-7 days, used to correct short term imbalances, interest rate charged is federal funds rate | federal funds purchased |
| what kind of loans do federal reserve district banks offer? | they offer short term loans to banks |
| what type of interest does the federal reserve bank charge? | primary credit lending rate |
| represents the sale of securities by one party to another party with an agreement to purchase the securities at a specified date and price | repurchase agreements |
| what type of assets do some banks own? | fixed assets: buildings, lands, and equipment |
| common purchasers of bonds used to finance the fixed assets? | households and financial institutions |
| funds acquired by the issuance of stock or the retention of earnings | bank capital |
| cash, bank loans, investment in securities federal funds sold, repurchase agreements, eurodollar loans, fixed assets, proprietary trading | common uses of funds by banks |
| do banks earn income from cash? | no, they simply hold enough to maintain a sufficient degree of liquidity |
| where do banks hold cash? | in their vaults and at their federal reserve district bank |
| types of business loans? | working capital loan, term loan, informal line of credit, revolving credit loan, loans at prime rate |
| used to support ongoing business operations | working capital loan |
| used to finance purchase of fixed assets such as machinery | term loan |
| businesses can borrow up to a specified amount within a specified period of time | informal line of credit |
| specified maximum amount of funds over a specified time period | revolving credit loan |
| loans to the most credit worthy customers | loans at prime rate |
| what are commercial banks accepting more of as collateral to loans? | intangible assets such as patents and brand names |
| when are businesses more willing finance expansion? | during a strong economy |
| types of consumer loans? | installment loans, credit cards |
| used to finance purchases of cars and household products | installment loans |
| what is the purpose of credit cards? | it allows people to purchase things without having to reapply for credit on each purpose |
| why do banks prefer personal loans and credit cards? | the interest rate on credit cards and personal loans is higher than the cost of funds |
| how long is the maturity for residential real estate loans? | 15 to 30 years |
| do banks purchase treasury and agency securities? and which can be sold in the secondary market? | yes; both can be sold in the secondary market but treasury securities is more active |
| use of bank funds to make investments for their own account | proprietary trading |
| an obligation by a bank to provide a specified loan amount to a particular firm upon the firm's request | loan commitment |
| bank agrees to purchase the commercial paper of a firm if the firm cant place its paper in the market | note issuance facility |
| backs a customer's obligation to a third party. if the customer cant meet the obligation, the bank will | standby letter of credit |
| an agreement between a customer and a bank to exchange one form of currency for another on a particular future date at a specified exchange rate | forward contracts on currencies |
| most common way for U.S. commercial banks to expand internationally? | establish branches, full service banking offices that can compete directly with other banks located in a particular area |
| how does the euro impact global competition? | it simplifies transactions and reduces exposure to exchange risk |
| as banks attempt to penetrate international markets, what happens? | the become exposed to conditions in those markets. meaning that with weaker economies, they are more likely to experience defaults |
Created by:
devenmccormick
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