Financial Institutions Exam 2 Correct Questions And
Verified Answers
Which of these are among the liabilities on a bank's balance sheet? -
(ANSWERS)Demand deposits and savings accounts
Banks must weigh the risk versus the return in deciding - (ANSWERS)what to hold
in their portfolio of assets.
Over the past several decades, shrinking interest rate spreads have led banks to turn
to fee-based services to generate revenue. - (ANSWERS)True
A mortgage loan is an example of a __________ loan. - (ANSWERS)long-term
consumer
If a bank made a self-liquidating inventory loan, it would be making a __________
loan. - (ANSWERS)short-term business
A leveraged buyout is an example of a __________ loan. - (ANSWERS)long-term
business
Savings accounts and certificates of deposit are commonly referred to as
__________ accounts. - (ANSWERS)nontransaction
Regulation Q, part of the Banking Act of 1933, prohibited banks from paying -
(ANSWERS)interest on checking accounts.
The Dodd-Frank Act allowed banks, for the first time, to - (ANSWERS)pay interest
on demand deposits.
Banks will sometimes use derivative contracts for which of these purposes? -
(ANSWERS)To speculate on interest rate movements
, Financial Institutions Exam 2 Correct Questions And
Verified Answers
Tevye owns a shoe store in the United States and wants to buy some shoes from
Aldo, an Italian shoe manufacturer. Aldo is unsure of Tevye's ability to make
payment and so is leery of selling the shoes to him. In order to make this transaction,
Tevye might go to his bank to get a(n) _________ letter of credit. -
(ANSWERS)Commercial
One advantage that nontrans action accounts have over transaction accounts is that
they - (ANSWERS)pay more interest
Banks will most often use financial derivatives, known as derivative contracts, for
which of these purposes? - (ANSWERS)To hedge exchange rate or interest rate risk
One very important function that banks perform in a society is matching savers with
borrowers. - (ANSWERS)True
US government securities are the most liquid assets that banks hold. -
(ANSWERS)False
Why are US Treasury securities an attractive asset for banks? - (ANSWERS)They
have a low default risk.
The liquid bank accounts most often used by accountholders to transfer funds to
other parties are known as - (ANSWERS)transaction deposit accounts.
What is the term for mortgages that are pooled together and then sold to investors? -
(ANSWERS)Mortgage-backed securities
A potentially important difference between NOW accounts and demand deposits is
that NOW accounts - (ANSWERS)may reserve the right to require seven days'
notice prior to making a withdrawal.
Verified Answers
Which of these are among the liabilities on a bank's balance sheet? -
(ANSWERS)Demand deposits and savings accounts
Banks must weigh the risk versus the return in deciding - (ANSWERS)what to hold
in their portfolio of assets.
Over the past several decades, shrinking interest rate spreads have led banks to turn
to fee-based services to generate revenue. - (ANSWERS)True
A mortgage loan is an example of a __________ loan. - (ANSWERS)long-term
consumer
If a bank made a self-liquidating inventory loan, it would be making a __________
loan. - (ANSWERS)short-term business
A leveraged buyout is an example of a __________ loan. - (ANSWERS)long-term
business
Savings accounts and certificates of deposit are commonly referred to as
__________ accounts. - (ANSWERS)nontransaction
Regulation Q, part of the Banking Act of 1933, prohibited banks from paying -
(ANSWERS)interest on checking accounts.
The Dodd-Frank Act allowed banks, for the first time, to - (ANSWERS)pay interest
on demand deposits.
Banks will sometimes use derivative contracts for which of these purposes? -
(ANSWERS)To speculate on interest rate movements
, Financial Institutions Exam 2 Correct Questions And
Verified Answers
Tevye owns a shoe store in the United States and wants to buy some shoes from
Aldo, an Italian shoe manufacturer. Aldo is unsure of Tevye's ability to make
payment and so is leery of selling the shoes to him. In order to make this transaction,
Tevye might go to his bank to get a(n) _________ letter of credit. -
(ANSWERS)Commercial
One advantage that nontrans action accounts have over transaction accounts is that
they - (ANSWERS)pay more interest
Banks will most often use financial derivatives, known as derivative contracts, for
which of these purposes? - (ANSWERS)To hedge exchange rate or interest rate risk
One very important function that banks perform in a society is matching savers with
borrowers. - (ANSWERS)True
US government securities are the most liquid assets that banks hold. -
(ANSWERS)False
Why are US Treasury securities an attractive asset for banks? - (ANSWERS)They
have a low default risk.
The liquid bank accounts most often used by accountholders to transfer funds to
other parties are known as - (ANSWERS)transaction deposit accounts.
What is the term for mortgages that are pooled together and then sold to investors? -
(ANSWERS)Mortgage-backed securities
A potentially important difference between NOW accounts and demand deposits is
that NOW accounts - (ANSWERS)may reserve the right to require seven days'
notice prior to making a withdrawal.
