FIN 390 EXAM 2 MING TSANG UWL QUESTIONS WITH
VERIFIED ACCURATE ANSWERS
Deposit Accounts - Answers - 1. Transaction deposits
2. Savings deposits
3. Time deposits
4. Money market deposit accounts
Borrowed Funds - Answers - 1. Federal funds purchased (borrowed)
2. Borrowing from the Federal Reserve banks
3. Repurchase agreements
4. Eurodollar borrowings
Long-Term Sources of Funds - Answers - 1. Bonds issued by the bank
2. Bank capital
Transaction Deposits - Answers - -A demand deposit account, or checking account, is
offered to customers who desire to write checks, use debit cards or transact online.
-A conventional demand deposit account requires a small minimum balance and pays
no interest.
-A negotiable order of withdrawal (NOW) account pays interest and provides checking
services.
Savings Deposits - Answers - The traditional savings account is the passbook savings
account, which does not permit check writing.
Time Deposits - Answers - time deposits are deposits that cannot be withdrawn until a
special maturity date. (CDs) (Negotiable Certificates of Deposits) (Money Markets)
Federal Funds Purchased - Answers - Represent a liability to the borrowing bank and
an asset to the lending bank. (typically for one to seven days)
Intent is to correct short-term fund imbalances by banks.
The interest rate charged in the federal funds market is called the federal funds rate.
Borrowing from the Federal Reserve Banks - Answers - The Federal Reserve district
banks regulate certain activities of banks and provide short-term loans to banks.
Often referred to as borrowing at the discount window.
The interest rate charged is the primary credit lending rate.
Mainly used to resolve a temporary shortage of funds.
Repurchase Agreements - Answers - the sale of securities by one party to another,
combined with an agreement to repurchase the securities at a specified date and price.
, Eurodollar Borrowings - Answers - May borrow dollars from those banks outside the
U.S. (typically in Europe) that accept dollar-denominated deposits, or Eurodollars
Bonds Issued by the Bank - Answers - -Banks own fixed assets such as land, buildings,
and equipment which are usually financed with long-term sources such as the issuance
of bonds.
-Common purchasers of these bonds are households and various financial institutions.
Bank Capital - Answers - funds acquired through stock issues or retained earnings.
Banks Uses of Funds - Answers - Cash, Bank Loans, Investment in securities, Federal
funds sold, Repurchase agreements, Eurodollar loans, Fixed assets, Proprietary trading
Cash - Answers - hold cash as reserves to meet the reserve requirements enforced by
the Federal Reserve.
Bank Loans - Answers - an amount of money loaned at interest by a bank to a
borrower, usually on collateral security, for a certain period of time.
Investment in Securities - Answers - generate revenue and provide banks with liquidity
Federal Funds Sold - Answers - Some banks lend funds to other banks in the federal
funds market.
The funds sold, or lent out, will be returned (with interest) at the time specified in the
loan agreement.
Repurchase Agreements - Answers - -from the borrower's perspective, a repurchase
agreement transaction involves repurchasing the securities it had previously sold
-from the lender's perspective, the repo represents a sale of securities it had previously
purchased
Eurodollar Loans - Answers - -provide dollar-denominated loans to corporations and
governments
-short-term and denominated in large amounts, such as $1 million or more
Fixed Assets - Answers - assets that are relatively permanent, such as land, buildings,
and equipment
Proprietary Trading - Answers - use of bank funds to make investments for their own
account
Off-Balance Sheet Activities - Answers - 1. Loan commitments
2. Standby letters of credit
3. Forward contracts on currencies
4. Interest rate swap contracts
5. Credit default swap contracts
VERIFIED ACCURATE ANSWERS
Deposit Accounts - Answers - 1. Transaction deposits
2. Savings deposits
3. Time deposits
4. Money market deposit accounts
Borrowed Funds - Answers - 1. Federal funds purchased (borrowed)
2. Borrowing from the Federal Reserve banks
3. Repurchase agreements
4. Eurodollar borrowings
Long-Term Sources of Funds - Answers - 1. Bonds issued by the bank
2. Bank capital
Transaction Deposits - Answers - -A demand deposit account, or checking account, is
offered to customers who desire to write checks, use debit cards or transact online.
-A conventional demand deposit account requires a small minimum balance and pays
no interest.
-A negotiable order of withdrawal (NOW) account pays interest and provides checking
services.
Savings Deposits - Answers - The traditional savings account is the passbook savings
account, which does not permit check writing.
Time Deposits - Answers - time deposits are deposits that cannot be withdrawn until a
special maturity date. (CDs) (Negotiable Certificates of Deposits) (Money Markets)
Federal Funds Purchased - Answers - Represent a liability to the borrowing bank and
an asset to the lending bank. (typically for one to seven days)
Intent is to correct short-term fund imbalances by banks.
The interest rate charged in the federal funds market is called the federal funds rate.
Borrowing from the Federal Reserve Banks - Answers - The Federal Reserve district
banks regulate certain activities of banks and provide short-term loans to banks.
Often referred to as borrowing at the discount window.
The interest rate charged is the primary credit lending rate.
Mainly used to resolve a temporary shortage of funds.
Repurchase Agreements - Answers - the sale of securities by one party to another,
combined with an agreement to repurchase the securities at a specified date and price.
, Eurodollar Borrowings - Answers - May borrow dollars from those banks outside the
U.S. (typically in Europe) that accept dollar-denominated deposits, or Eurodollars
Bonds Issued by the Bank - Answers - -Banks own fixed assets such as land, buildings,
and equipment which are usually financed with long-term sources such as the issuance
of bonds.
-Common purchasers of these bonds are households and various financial institutions.
Bank Capital - Answers - funds acquired through stock issues or retained earnings.
Banks Uses of Funds - Answers - Cash, Bank Loans, Investment in securities, Federal
funds sold, Repurchase agreements, Eurodollar loans, Fixed assets, Proprietary trading
Cash - Answers - hold cash as reserves to meet the reserve requirements enforced by
the Federal Reserve.
Bank Loans - Answers - an amount of money loaned at interest by a bank to a
borrower, usually on collateral security, for a certain period of time.
Investment in Securities - Answers - generate revenue and provide banks with liquidity
Federal Funds Sold - Answers - Some banks lend funds to other banks in the federal
funds market.
The funds sold, or lent out, will be returned (with interest) at the time specified in the
loan agreement.
Repurchase Agreements - Answers - -from the borrower's perspective, a repurchase
agreement transaction involves repurchasing the securities it had previously sold
-from the lender's perspective, the repo represents a sale of securities it had previously
purchased
Eurodollar Loans - Answers - -provide dollar-denominated loans to corporations and
governments
-short-term and denominated in large amounts, such as $1 million or more
Fixed Assets - Answers - assets that are relatively permanent, such as land, buildings,
and equipment
Proprietary Trading - Answers - use of bank funds to make investments for their own
account
Off-Balance Sheet Activities - Answers - 1. Loan commitments
2. Standby letters of credit
3. Forward contracts on currencies
4. Interest rate swap contracts
5. Credit default swap contracts
