Term
| Depository institutions include commercial banks, savings and loans, savings banks, and credit unions. |
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Definition
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Term
| 2.An investment bank accepts deposits, makes loans, and issues checking accounts. |
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Definition
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Term
| 3.Part of the reason that the Banking Act of 1933 was passed was in response to the large numbers of bank failures. |
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Definition
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Term
| 4.Credit unions are cooperative nonprofit organizations that exist primarily to provide member depositors with consumer credit. |
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Definition
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Term
| 5.The National Banking Act of 1864 made it possible for banks to receive federal charters. |
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Definition
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Term
| 6.Today, reserve requirements imposed by the Federal Reserve apply only to member banks. |
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Definition
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Term
| 7.The principal assets of depository institutions are cash, securities, loans, and fixed assets. |
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Definition
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Term
| 8.Branch banks are those banking offices that are controlled by a single parent bank. |
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Definition
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Term
| 9.The bank holding company may not engage in direct banking activities. |
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Definition
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Term
| 10.The main provisions of the Monetary Control Act of 1980 are deregulation and monetary control. |
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Definition
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Term
| 11.The Monetary Control Act prohibited the Federal Reserve from controlling thrift institutions. |
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Definition
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Term
| 12.Pension funds receive contributions from employees and/or their employers and invest the proceeds on behalf of the employees. |
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Definition
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Term
| 13.The Glass-Steagall Act was repealed with the passage of the Gramm-Leach-Bliley Act of 1999. |
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Definition
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Term
| 14.The Federal Reserve Act of 1913 created a system of central banks in the United States. |
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Definition
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Term
| 15.The prime rate of interest has been relatively stable during the past twenty-five years. |
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Definition
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Term
| 16.International banking exists when banks operate in more than one country. |
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Definition
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Term
| 17.Major types of financial institutions in the U.S. include commercial banks, mutual funds, insurance companies, and pension funds. |
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Definition
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Term
| 18.Investment companies sell shares in their firms to individuals and invest the pooled proceeds in corporate and government securities. |
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Definition
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Term
| 19.Insurance companies sell shares in their firms to individuals and invest the pooled proceeds in corporate and government securities. |
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Definition
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Term
| 20.Investment banking firms sell shares in their firms to individuals and invest the pooled proceeds in corporate and government securities. |
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Definition
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Term
| 21.Mutual funds are open-end investment companies that can issue an unlimited number of shares to its investors and use the pooled proceeds to purchase corporate and government securities. |
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Definition
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Term
| 22.Insurance companies receive contributions from employees and/or their employers and invest the proceeds on behalf of the employees for use during their retirement years. |
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Definition
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Term
| 23.Pension funds receive contributions from employees and/or their employers and invest the proceeds on behalf of the employees for use during their retirement years. |
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Definition
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Term
| 24.Investment banking firms sell or market new securities issued by businesses to individual and institutional investors. |
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Definition
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Term
| 25.Investment banking firms assist individuals to purchase new or existing securities issues or to sell previously purchased securities. |
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Definition
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Term
| 26.Mortgage banking firms provide loans directly to consumers and businesses or aid individuals in obtaining financing of durable goods and homes. |
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Definition
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Term
| 27.Commercial banks provide loans directly to consumers and businesses or aid individuals in obtaining financing of durable goods and homes. |
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Definition
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Term
| 28.Commercial banks accept deposits and makes loans to individuals and businesses. |
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Definition
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Term
| 29.Investment banks accept deposits and makes loans to individuals and businesses. |
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Definition
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Term
| 30.The U.S. banking system as it exists today is relatively unchanged since just before the Civil War. |
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Definition
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Term
| 31.Credit unions are cooperative nonprofit organizations that exist primarily to provide member depositors with consumer credit. |
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Definition
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Term
| 32.Savings and loan associations are cooperative nonprofit organizations that exist primarily to provide member depositors with consumer credit. |
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Definition
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Term
| 33.The primary types of assets on a bank’s balance sheet include cash and deposits. |
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Definition
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Term
| 34.The largest type of assets on a bank's balance is loans. |
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Definition
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Term
| 35.The largest type of liabilities on a bank's balance sheet is deposits. |
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Definition
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Term
| 36.The effective rate of interest is generally lower on a standard loan than an otherwise equivalent discount loan. |
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Definition
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Term
| 37.Bank solvency reflects the ability to keep the value of a bank’s assets greater than its liabilities. |
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Definition
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Term
| 38.Credit risk is the likelihood that a bank will be unable to meet depositor withdrawal demands and other liabilities when due. |
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Definition
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Term
| 39.Credit risk is the chance of nonpayment or delayed payment of interest or principal. |
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Definition
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Term
| 40.Secondary reserves are vault cash and deposits held at other depository institutions and at Federal Reserve Banks. |
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Definition
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Term
| 41.Interest rate risk results from possible price fluctuations in fixed-rate debt instruments associated with changes in market interest rates. |
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Definition
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Term
| 42.The Basel Accord was an agreement between major central banks to adopt capital adequacy requirements for internationally involved banks. |
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Definition
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Term
1. Which of the following institutions is not part of the modern banking system (depository institutions)?
a. credit unions
b. savings and loan associations
c. mutual funds
d. savings banks
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Definition
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Term
| 2. The Bank of North America: |
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Definition
| a. was the first incorporated bank in the United States |
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Term
3. The notes of the Bank of North America
a. served as a circulating medium of exchange
b. loaned liberally to the government
c. were redeemed in metallic coins upon demand
d. all the above |
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Definition
| a. served as a circulating medium of exchange b. loaned liberally to the government c. were redeemed in metallic coins upon demand Answer: d. all the above |
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Term
4. Which of the following are not thrift institutions?
a. credit unions
b. savings and loan institutions
c. commercial banks
d. all the above
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Definition
| c. commercial banks Thrift Institutions are non-commercial bank depository institutions |
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Term
| 5. The National Banking Act of 1864 provided for: |
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Definition
| a. federally chartered banks |
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Term
6. The Depository Institutions Deregulation and Monetary Control Act:
a. established a system of central banks
b. has resulted in more competition among depository institutions
c. increased federal deposit insurance from $40,000 to $80,000 for each account
d. established minimum capital requirements for banks with federal charters
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Definition
| b. has resulted in more competition among depository institutions |
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Term
| 7. The most basic functions of depository institutions are: |
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Definition
| d. accepting deposits and granting loans |
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Term
| 8. Which of the following is not an asset of depository institutions? |
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Definition
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Term
| 9. The principal liabilities of depository institutions are: |
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Definition
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Term
| 10. The principal assets of savings banks are: |
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Definition
|
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Term
|
Definition
| b. made up of individuals who possess common bonds of association |
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Term
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Definition
| b. enable depository institutions to compete effectively for funds that were flowing in large amounts to money market funds |
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Term
13. The adequacy of capital for commercial banks as measured by regulatory authorities is:
a. a composite of equity capital and total assets
b. a measure of investment success
c. based on the total amount of deposits of a bank
d. based on the ratio of federal government obligations to deposits
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Definition
| a. a composite of equity capital and total assets |
|
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Term
| 14. The interest rate charged by banks for short-term unsecured loans to their highest quality business customers is referred to as the: |
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Definition
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Term
15. The Garn–St. Germain Depository Institutions Act, among other things:
a. extended the Fed’s control to thrift institutions and to commercial banks that are not members of the Fed
b. enabled depository institutions to issue money market accounts with no regulated interest rate ceiling
c. was designed to assist the investment banking industry
d. all the above
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Definition
| b. enabled depository institutions to issue money market accounts with no regulated interest rate ceiling |
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Term
| 16. The Resolution Trust Corporation was brought into existence to: |
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Definition
| c. take over and liquidate the assets of failed savings and loan institutions |
|
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Term
17. The First Bank of the United States ceased operations because:
a. the need to provide financing for the Civil War was not supported by Congress
b. of the opposition of state banking interests
c. its charter had expired and there was no provision for its renewal
d. both b and c
|
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Definition
| b. of the opposition of state banking interests c. its charter had expired and there was no provision for its renewal Answer:d. both b and c |
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Term
| 18. During the colonial period in the nation’s history, banks depended on: |
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Definition
| a. their own issue of paper money |
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Term
19. Which of the following statements is most correct?
a. The Gramm-Leach-Bliley Act of 1999 provides the basis for modern bank regulation.
b. The Federal Reserve System was created in large measure to force state chartered banks into conformity with nationally chartered banks.
c. "Wildcat banking" during the first half of the 1800s referred to risky banking practices by many state banks, such as excessive note issues, lack of adequate bank capital, and insufficient reserves against their notes and deposits.
d. All the above statements are equally correct.
|
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Definition
| c. “Wildcat banking” during the first half of the 1800s referred to risky banking practices by many state banks, such as excessive note issues, lack of adequate bank capital, and insufficient reserves against their notes and deposits. |
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Term
| 20. The holding-company device to control two or more commercial banks: |
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Definition
| b. has increased in importance in recent years |
|
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Term
| 21. One of the most significant advantages claimed by branch banking is: |
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Definition
| b. convenience for customers |
|
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Term
| 22. Legislation that permits depository institutions to compete with money market mutual funds on an equal basis with respect to interest rates offered to investors is the: |
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Definition
| a. Garn–St. Germain Depository Institutions Act |
|
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Term
| 23. The function of adequate bank capital for a commercial bank is to: |
|
Definition
| c. provide a cushion against credit risk and interest rate risk |
|
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Term
|
Definition
| a. a bank may have only one full-service office |
|
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Term
| 25. Limited branch banking: |
|
Definition
| a. permits banks to located offices within a geographically defined distance of the main office |
|
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Term
| 26. Statewide branch banking: |
|
Definition
| b. means that branch systems are less likely to fail than independent systems |
|
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Term
27. The principal assets of banks do not include:
a. cash
b. unsecured loans
c. time deposits
d. U.S. government securities
|
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Definition
|
|
Term
| 28. Foreign banks in the United States: |
|
Definition
| b. need the approval of the Federal Reserve |
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Term
29. Which of the following would not be part of a bank's Owner's Capital?
a. bank premises
b. common stock of the bank
c. retained earnings
d. all of the above are part of a bank's Owner's Capital
|
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Definition
|
|
Term
| 30. Legislation that provided for the separation of commercial banking and investment banking activities in the |
|
Definition
|
|
Term
31. The National Banking Act of 1864:
a. established minimum capital requirements for federally chartered banks
b. regulated loans with respect to safety and liquidity
c. established minimum reserve requirements
d. all of the above |
|
Definition
| a. established minimum capital requirements for federally chartered banks b. regulated loans with respect to safety and liquidity c. established minimum reserve requirements Answer:d. all of the above |
|
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Term
32. The Monetary Control Act:
a. extended the Fed’s control to thrift institutions and non-member commercial banks
b. has resulted in more competition among depository institutions
c. increased federal deposit insurance from $40,000 to $80,000 for each account
d. established minimum capital requirements for banks with federal charters
|
|
Definition
| a. extended the Fed’s control to thrift institutions and non-member commercial banks |
|
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Term
| 33. The primary purpose of this Act was to aid the savings and loan industry |
|
Definition
| a. Garn–St. Germain Depository Institutions Act |
|
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Term
| 34. In general, the effective rate of interest on a discount loan |
|
Definition
| b. is higher than that on a standard loan |
|
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Term
|
Definition
| a. include the cash assets of the firm under the heading “cash and balances due from depository institutions. |
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Term
36. Reasons that banks become insolvent include all of the following EXCEPT:
a. excessive credit risk
b. interest rate risk
c. insufficient collateral
d. all of the above are correct
|
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Definition
| c. insufficient collateral |
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Term
| 37. Commercial banks obtain the bulk of their loanable funds from: |
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Definition
|
|
Term
| 38. The likelihood that borrowers are ill and would not be able to make interest and principal payments is an example of: |
|
Definition
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Term
39. Financial institutions include:
a. banks
b. pension funds
c. insurance companies
d. all of the above |
|
Definition
| a. banks b. pension funds c. insurance companies Answer:d. all of the above |
|
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Term
| 40. Another name for an open-end investment company is a: |
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Definition
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Term
41. Types of financial institutions include all of the following EXCEPT:
a. commercial banks
b. pension funds
c. insurance companies
d. brokerage firms
e. all of the above are types of financial institutions |
|
Definition
| a. commercial banks b. pension funds c. insurance companies d. brokerage firms Answer:e. all of the above are types of financial institutions |
|
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Term
42. Types of financial institutions include all of the following EXCEPT:
a. commercial banks
b. pension funds
c. insurance companies
d. all of the above are types of financial institutions |
|
Definition
| a. commercial banks b. pension funds c. insurance companies Answer:d. all of the above are types of financial institutions |
|
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Term
| 43. An open-end investment company that can issue an unlimited number of its shares to investors and use the pooled proceeds to purchase corporate and government securities is called a (n) |
|
Definition
|
|
Term
| 44. An organization that sells or markets new securities issued by businesses to individuals and institutional investors is called a (n) |
|
Definition
|
|
Term
| 45. An organization that received contributions from employees and/or their employers and invests the proceeds on behalf of the employees for use during their retirement years is called a (n) |
|
Definition
|
|
Term
| 46. An organization that sells shares in their firms to individuals and others and invests the proceeds in corporate and government securities is called a (n) |
|
Definition
|
|
Term
| 47. An organization that provides loans directly to consumers and businesses or aid individuals in obtaining financing for durable goods is called a (n) |
|
Definition
|
|
Term
| 48. The _______________________ provided for separation of commercial banking and investment banking activities in the United States. |
|
Definition
|
|
Term
| 49. The _______________________ was designed to reduce or eliminate interest rate limitations and increase access to various sources of funds available to banks and thrifts and expand the Federal Reserve’s control over thrifts and non-member banks. |
|
Definition
| d. Depository Institutions Deregulation and Monetary Control Act |
|
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Term
| 50. The _______________________ was designed mainly to assist the savings and loan industry. |
|
Definition
| c. Garn-Saint Germain Act |
|
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Term
51. The three basic ways to clear a check through the U.S. banking system includes all of the following EXCEPT:
a. through a Federal Reserve Bank
b. through the U.S. Treasury Bank
c. through a bank clearinghouse
d. bank to bank
|
|
Definition
| b. through the U.S. Treasury Bank |
|
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Term
| 52. The _______________________ made it possible for banks to receive federal charters and provided a basis for national banking laws. |
|
Definition
| the national banking act of 1864 |
|
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Term
| 53. The _______________________ established the U.S. central banking system and increased the effectiveness of commercial banking in general. |
|
Definition
|
|
Term
| 54. The item on the liabilities and equity section of a bank’s balance sheet that represents the smallest proportion of bank’s assets is: |
|
Definition
|
|
Term
| 55. The item on the liabilities and equity section of a bank’s balance sheet that represents the largest proportion of a typical bank’s assets is: |
|
Definition
|
|
Term
| 56. The item on the assets side of a bank’s balance sheet that represents the largest proportion of bank assets is: |
|
Definition
|
|
Term
| 57. __________________ is the process by which individual savings are accumulated in depository institutions and, in turn, lent or invested. |
|
Definition
| b. Financial intermediation |
|
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Term
| 58. __________________ accept savings from individuals and then lend these pooled savings to businesses, governments, and individuals. |
|
Definition
| c. Depository institutions |
|
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Term
| 59. __________________ accept savings from individuals and then lend these pooled savings to businesses, governments, and individuals. |
|
Definition
a. Insurance companies
b. Commercial finance companies
c. Government institutions
d. Investment banks
Answer: e. none of the above |
|
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Term
| 60. __________________ collect premiums on insurance policies and employee/employer contributions from pension fund participants and provide retirement benefits and insurance against major financial losses. |
|
Definition
| b. Contractual savings organizations |
|
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Term
| 61. __________________ collect premiums on insurance policies and employee/employer contributions from pension fund participants and provide retirement benefits and insurance against major financial losses. |
|
Definition
a. Banks
b. Personal service firms
c. Investment banking firms
d. Brokerage firms
Answer:e. none of the above |
|
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Term
| 62. __________________ are the two important forms of contractual savings organizations. |
|
Definition
| a. Insurance companies and pension funds |
|
|
Term
63. __________________ are the two important forms of contractual savings organizations.
a. Insurance companies and brokerage firms
b. banks and insurance companies
c. Investment banks and pension funds
d. Pension funds and brokerage firms
e. none of the above |
|
Definition
| a. Insurance companies and brokerage firms b. banks and insurance companies c. Investment banks and pension funds d. Pension funds and brokerage firms Answer:e. none of the above |
|
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Term
| 64. __________________ accept and invest individual savings and also facilitate the sale and transfer of securities between investors. |
|
Definition
|
|
Term
| 65. Investment companies (mutual funds), investment banking firms, and brokerage firms are the primary types of ____________. |
|
Definition
|
|
Term
| 66. _______________ provide loans directly to consumers and businesses and help borrowers obtain mortgage loans on real property. |
|
Definition
|
|
Term
| 67. _______________ are non-commercial bank depository institutions that include savings banks and credit unions, which accumulate individual savings and lend primarily to other individuals. |
|
Definition
|
|
Term
68. _______________ are non-commercial bank depository institutions that include savings banks and credit unions, which accumulate individual savings and lend primarily to other individuals.
a. Banks
b. Securities firms
c. Pension funds
d. Finance companies
e. none of the above |
|
Definition
| a. Banks b. Securities firms c. Pension funds d. Finance companies Answer:e. none of the above |
|
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Term
| 69. _______________ accept the savings of individuals and lend pooled savings to individuals primarily in the form of mortgage loans and operate almost entirely in New England , New York, and New Jersey, with most of their assets continuing to be invested in mortgage loans. |
|
Definition
|
|
Term
| 70. _______________ accept the savings of individuals and lend pooled savings to individuals primarily in the form of mortgage loans and operate almost entirely in New England , New York, and New Jersey, with most of their assets continuing to be invested in mortgage loans. |
|
Definition
a. Commercial banks
b. Thrift institutions
c. Credit unions
d. Finance companies
Answer:e. none of the above |
|
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Term
| 71. _______________ are cooperative nonprofit organizations that exist primarily to provide member depositors with consumer credit, including the financing of automobiles and the purchase of homes, and derive their funds almost entirely from the savings of their members. |
|
Definition
|
|
Term
| 72. _______________ are cooperative nonprofit organizations that exist primarily to provide member depositors with consumer credit, including the financing of automobiles and the purchase of homes, and derive their funds almost entirely from the savings of their members. |
|
Definition
a. Commercial banks
b. Thrift institutions
c. Savings banks
d. Brokerage firms
Answer:e. none of the above |
|
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Term
73. _______________ sell or market new securities issued by businesses to individual and institutional investors, whereas ______________ firms assist individuals who want to purchase new or existing securities issues or who want to sell previously purchased securities.
a. Brokerage firms, investment banks
b. Investment banks, savings banks
c. savings banks, investment banks
d. Brokerage firms, savings banks
e. none of the above |
|
Definition
| a. Brokerage firms, investment banks b. Investment banks, savings banks c. savings banks, investment banks d. Brokerage firms, savings banks Answer:e. none of the above |
|
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Term
| 74. _______________ provide loans directly to consumers and businesses or aid individuals in obtaining financing of durable goods and homes, whereas ______________ originate mortgage loans on homes and other real property by bringing together borrowers and institutional investors. |
|
Definition
| d. finance companies, mortgage banking firms |
|
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Term
75. _______________ provide loans directly to consumers and businesses or aid individuals in obtaining financing of durable goods and homes, whereas ______________ originate mortgage loans on homes and other real property by bringing together borrowers and institutional investors.
a. thrift institutions, savings and loans
b. thrift institutions, mortgage banking firms
c. property brokers, savings and loans
d. property brokers, mortgage banking firms
e. none of the above |
|
Definition
| a. thrift institutions, savings and loans b. thrift institutions, mortgage banking firms c. property brokers, savings and loans d. property brokers, mortgage banking firms Answer:e. none of the above |
|
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Term
| 76. If $5,000 is borrowed on a discount basis and the rate is 10 percent, the annual percentage interest rate on this loan would be: (Pick the closest answer.) |
|
Definition
|
|
Term
| 77. The Equity Capital Ratio for a bank with equity capital of $3 million and total assets of $50 million would be: |
|
Definition
|
|
Term
| 78. Checks may be cleared by: |
|
Definition
a. the Federal Reserve
b. banks in the banking system
Answer:c. both a and b |
|
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Term
| 79. If $8,500 is borrowed on a discount basis and the rate is 6 percent, the annual percentage interest rate on this loan would be: (Pick the closest answer.) |
|
Definition
|
|
Term
| 80. If $6,800 is borrowed for one year at a standard interest rate of 5 percent per year, at the end of the year the borrower would repay a total of to the lender. (Pick the closest answer.) |
|
Definition
|
|
Term
| 81. If $6,800 is borrowed for one year and at the end of the year the borrower repays $7,140 to the lender, the standard annual interest rate paid was: (Pick the closest answer.) |
|
Definition
|
|
Term
| 82. If $6,800 is borrowed for one year at a standard interest rate of 5 percent per year, at the end of the year the borrower would repay in interest to the lender. (Pick the closest answer.) |
|
Definition
|
|
Term
| 83. The Equity Capital Ratio for a bank with owners’ equity of $3 million is 6 percent. This bank’s total assets would be: (Pick the closest answer.) |
|
Definition
|
|
Term
| 84. The Equity Capital Ratio for a bank with total assets of $50 million is 6 percent. This bank’s equity capital would be: (Pick the closest answer.) |
|
Definition
|
|
Term
| 85. When market interest rates_______ , debt instruments (bonds)________ in value. |
|
Definition
|
|
Term
| 86. If $12,500 is borrowed for one year at a standard interest rate of 4.2 percent per year, at the end of the year the borrower would repay a total of to the lender. (Pick the closest answer.) |
|
Definition
|
|
Term
| 87. If $18,200 is borrowed for one year and at the end of the year the borrower repays $18,837 to the lender, the standard annual interest rate paid was: (Pick the closest answer.) |
|
Definition
|
|
Term
| 88. If $45,000 is borrowed for one year at a standard interest rate of 4.25 percent per year, at the end of the year the borrower would repay in interest to the lender. (Pick the closest answer.) |
|
Definition
|
|
Term
| 89. If $8,300 is deposited in a bank for one year at a standard interest rate of 3.7 percent per year, at the end of the year the depositor would receive a total of from the bank. (Pick the closest answer.) |
|
Definition
|
|
Term
| 90. If $1,500 is deposited in a bank for one year and at the end of the year the depositor receives $1,531.50 from the bank, the standard annual interest rate paid was: (Pick the closest answer.) |
|
Definition
|
|
Term
| 91. If $5,200 is deposited in a bank for one year at a standard interest rate of 3.15 percent per year, at the end of the year the depositor would receive in interest from the bank. (Pick the closest answer.) |
|
Definition
|
|
Term
| 92. If you received $7,990 on a discount loan and had to repay $8,500 one year later, the actual annual percentage interest rate on this loan would be: (Pick the closest answer.) |
|
Definition
|
|
