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Exam 9: Banking and the Management of Financial Institutions

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Question 21

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Bankers' concerns regarding the optimal mix of excess reserves,secondary reserves,borrowings from the Fed,and borrowings from other banks to deal with deposit outflows is an example of

A) liability management.
B) liquidity management.
C) managing interest rate risk.
D) managing credit risk.

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Question 22

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Which of the following statements are TRUE?

A) Checkable deposits are payable on demand.
B) Checkable deposits do not include NOW accounts.
C) Checkable deposits are the primary source of bank funds.
D) Checkable deposits are assets for the bank.

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Question 23

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Because ________ are less liquid for the depositor than ________,they earn higher interest rates.

Because of their ________ liquidity,________ U.S. government securities are called secondary reserves.

The amount of checkable deposits that banks are required by regulation to hold are the

Most of a bank's operating income results from

The principal-agent problem that exists for bank trading activities can be reduced through

Credit risk management tools include

Bruce the Bank Manager can reduce interest rate risk by ________ the duration of the bank's assets to increase their rate sensitivity or,alternatively,________ the duration of the bank's liabilities.

Measuring the sensitivity of bank profits to changes in interest rates by multiplying the gap for several maturity subintervals times the change in the interest rate is called

Long-term customer relationships ________ the cost of information collection and make it easier to ________ credit risks.

Which of the following statements is FALSE?

Net profit after taxes per dollar of equity capital is a basic measure of bank profitability called

Bank loans from the Federal Reserve are called ________ and represent a ________ of funds.

Because ________ are less liquid for the depositor than ________,they earn higher interest rates.

Banks earn profits from off-balance sheet loan sales

Which of the following are transaction deposits?

________ may antagonize customers and thus can be a very costly way of acquiring funds to meet an unexpected deposit outflow.

Which of the following would a bank NOT hold as insurance against the highest cost of deposit outflow-bank failure?

Through correspondent banking,large banks provide services to small banks,including