A mortgage loan appears as a ____ on a bank's balance A. Asset;equity
sheet and as a ____ on a person's balance sheet. **B. Asset;liability
C. Liability;equity
D. Liability;asset
E. Equity;asset
F. Equity;liability
One measure of a bank's profitability is "net interest A. A bank pays higher interest rates to deposits than it receives from loans
income". This is based on the idea that B. A bank receives higher interest rates on its assets relative to what it pays for its
liabilities
C. A Bank's Liabilities Earn Interest Income
Which of the following statements is not true? A. The largest source of funds for banks to lend comes from the owner's capital.
B. Transaction deposits make up less than 10 percent of banks sources of funds.
C. The largest sources of funds for banks are non‐transactions accounts.
D. Borrowings are a larger source of funds for banks than transaction deposits
By gathering lots of small deposits and making loans, a A. Increases the risk of savers.
bank ... B. Increased diversification of savers
C. Decrease liquidity
D. Increase information asymmetries.
**E. Both B and C are correct
A rumor starts that says a bank has suffered significant **A. liquidity risk.
losses and may not be able to honor its promises to B. operational risk.
depositors. This causes most of the depositors to line up C. interest rate risk.
in front of the bank the next morning wanting to withdraw D. credit risk
their deposits. This is an example of:
Credit risk is a bigger problem for A. larger banks because they have more loans
B. larger banks because they tend to be geographically concentrated
**C. smaller banks because they tend to have less diversified markets
D. smaller banks because they have lower amounts of capital
Interest rate risk arises because A. A bank's assets tend to be more interest rate sensitive than its liabilities
**B. A bank's liabilities tend to be more interest rate sensitive than its assets
C. A Bank's Capital Tends To Increase When Interest Rates Rise
Insurance companies perform all of the following A. transferring risk.
functions performed by financial intermediaries except: B. pooling the resources of small savers.
C. making large investments.
**D. supplying liquidity.
In general, finance companies differ from banks A. In their composition of assets
**B. In their composition of liabilities
C. In Their Composition of equity.
D. Both A and B
, A bank run can occur when A. A bank is insolvent
B. A bank has liquidity risk
**C. A bank doesn't have enough cash on hand
D. A Bank's Leverage Increases
E. Both C and D are correct
A "lender of last resort" is A. A bank that people with bad credit can borrow from
B. A large bank that lends to other banks
**C. The Federal Reserve in the U.S.
D. Another Name For Being Able To Borrow From Your Parents
Deposit insurance is believed to have A. Increased leverage
B. Decreased leverage
C. Increased risk taking.
D. Decreased risk taking.
**E. Both A and C
F. Both B and C
A bank has two types of assets, risk-free cash and risky A. 3.33%
loans. The regulator assigns a risk weight of either 0 or 1 **B. 5%
to assets. Suppose this bank has $100 of cash and $200 of C. 10%
loans and tier 1 capital = $10. What is its capital adequacy D. 12%
ratio? E. None of the Above
The Federal Reserve is A. The lender of last resort
B. A source of deposit insurance
C. A central bank
**D. Both A and C
E. All of the above
Price stability implies **A. Low levels of inflation
B. High levels of inflation.
C. Stock prices that don't change much
D. High Interest Rates
In general, if a central bank tries to increase economic A. Inflation will increase
growth, B. Inflation will decrease.
C. Prices will decrease
D. Unemployment will decrease
**E. A and D are correct
If you withdraw money from your savings account, then ... A. The liabilities of your bank decrease
B. Your assets decrease
C. The Fed's liabilities increase
D. Both A and C are correct
If you borrow money from your bank, then ... A. The assets of your bank decrease
B. Your assets increase
C. The liabilities of your bank increase
D. Both A and C are correct
sheet and as a ____ on a person's balance sheet. **B. Asset;liability
C. Liability;equity
D. Liability;asset
E. Equity;asset
F. Equity;liability
One measure of a bank's profitability is "net interest A. A bank pays higher interest rates to deposits than it receives from loans
income". This is based on the idea that B. A bank receives higher interest rates on its assets relative to what it pays for its
liabilities
C. A Bank's Liabilities Earn Interest Income
Which of the following statements is not true? A. The largest source of funds for banks to lend comes from the owner's capital.
B. Transaction deposits make up less than 10 percent of banks sources of funds.
C. The largest sources of funds for banks are non‐transactions accounts.
D. Borrowings are a larger source of funds for banks than transaction deposits
By gathering lots of small deposits and making loans, a A. Increases the risk of savers.
bank ... B. Increased diversification of savers
C. Decrease liquidity
D. Increase information asymmetries.
**E. Both B and C are correct
A rumor starts that says a bank has suffered significant **A. liquidity risk.
losses and may not be able to honor its promises to B. operational risk.
depositors. This causes most of the depositors to line up C. interest rate risk.
in front of the bank the next morning wanting to withdraw D. credit risk
their deposits. This is an example of:
Credit risk is a bigger problem for A. larger banks because they have more loans
B. larger banks because they tend to be geographically concentrated
**C. smaller banks because they tend to have less diversified markets
D. smaller banks because they have lower amounts of capital
Interest rate risk arises because A. A bank's assets tend to be more interest rate sensitive than its liabilities
**B. A bank's liabilities tend to be more interest rate sensitive than its assets
C. A Bank's Capital Tends To Increase When Interest Rates Rise
Insurance companies perform all of the following A. transferring risk.
functions performed by financial intermediaries except: B. pooling the resources of small savers.
C. making large investments.
**D. supplying liquidity.
In general, finance companies differ from banks A. In their composition of assets
**B. In their composition of liabilities
C. In Their Composition of equity.
D. Both A and B
, A bank run can occur when A. A bank is insolvent
B. A bank has liquidity risk
**C. A bank doesn't have enough cash on hand
D. A Bank's Leverage Increases
E. Both C and D are correct
A "lender of last resort" is A. A bank that people with bad credit can borrow from
B. A large bank that lends to other banks
**C. The Federal Reserve in the U.S.
D. Another Name For Being Able To Borrow From Your Parents
Deposit insurance is believed to have A. Increased leverage
B. Decreased leverage
C. Increased risk taking.
D. Decreased risk taking.
**E. Both A and C
F. Both B and C
A bank has two types of assets, risk-free cash and risky A. 3.33%
loans. The regulator assigns a risk weight of either 0 or 1 **B. 5%
to assets. Suppose this bank has $100 of cash and $200 of C. 10%
loans and tier 1 capital = $10. What is its capital adequacy D. 12%
ratio? E. None of the Above
The Federal Reserve is A. The lender of last resort
B. A source of deposit insurance
C. A central bank
**D. Both A and C
E. All of the above
Price stability implies **A. Low levels of inflation
B. High levels of inflation.
C. Stock prices that don't change much
D. High Interest Rates
In general, if a central bank tries to increase economic A. Inflation will increase
growth, B. Inflation will decrease.
C. Prices will decrease
D. Unemployment will decrease
**E. A and D are correct
If you withdraw money from your savings account, then ... A. The liabilities of your bank decrease
B. Your assets decrease
C. The Fed's liabilities increase
D. Both A and C are correct
If you borrow money from your bank, then ... A. The assets of your bank decrease
B. Your assets increase
C. The liabilities of your bank increase
D. Both A and C are correct
