Question 1

The maximum amount of FDIC deposit insurance per eligible deposit account is

Accepted Answer

A)   $50,000
B)   $100,000
C)   $250,000
D)   $500,000
E)   greater than $1,000,000.

Question 2

A small state bank currently has reserves equal to $300,000.If the state reserve requirement is 20%, but the bank currently maintains a 30% reserve, what amount of reserves would the bank need if it met the reserve requirements exactly?

Accepted Answer

A)   $200,000
B)   $100,000
C)   $300,000
D)   $1,000,000
E)   None of the above.

Question 3

Which statement is not true about life insurance companies?

Accepted Answer

A)   They have relatively predictable inflows and outflows.
B)   Their liabilities are long-term in nature.
C)   They invest heavily in short-term highly marketable securities.
D)   They sell contracts that offer financial protection against premature death.
E)   All of the above.

Question 4

In general, cash and marketable securities make up the largest percentage of commercial bank assets.

Accepted Answer

A) True 
 B)False

Question 5

Because life insurance companies are able to invest in corporate bonds and stocks, they provide an important source of long-term funds for companies.

Accepted Answer

A) True 
 B)False

Question 6

The original purpose of deposit insurance was to

Accepted Answer

A)   prevent bank runs by large depositors.
B)   increase the regulatory monitoring of banks.
C)   force the banks to invest in less risky investments.
D)   prevent bank panics by insuring the small deposits of many people.
E)   All of the above.

Question 7

Suppose the Federal Reserve increases deposits at financial institutions by $50 billion through its open market operations.If the reserve requirement for all deposits is 8%, what is the maximum impact the Fed's actions can have on total deposits?

Accepted Answer

A)   $575 billion increase
B)   $54.3 billion increase
C)   $625 billion increase
D)   An increase greater than $1 trillion
E)   Total deposits would decrease, but there is not enough information to compute the amount.

Question 8

A mutual fund that invests primarily in short-term, low risk securities like commercial paper and Treasury bills are called ____ mutual funds.

Accepted Answer

A)   value
B)   growth
C)   money market
D)   indexed

Question 9

What is the maximum change in total deposits at financial institutions if the Fed sells $120 billion of government securities to dealers, and the reserve requirement applicable to all deposits is 10%?

Accepted Answer

A)   $1.20 trillion decrease
B)   $133 billion increase
C)   $1.08 trillion increase
D)   $1.08 trillion decrease
E)   None of the above.

Question 10

If the federal reserve purchases $100 million worth of government securities in open market operations, what is the maximum amount of change in the money supply if the reserve requirement is 8% and banks hold no excess reserves?

Accepted Answer

A)   Decrease by $1.25 billion
B)   Increase by $1.25 billion
C)   Decrease by $1.15 billion
D)   Increase by $1.15 billion

Question 11

Fractional reserves mean that banks maintain less than 100 percent of customer deposits in liquid assets, or reserves.

Accepted Answer

A) True 
 B)False

Question 12

Financial intermediaries are the end users of the funds that they get from those who wish save money for the future.

Accepted Answer

A) True 
 B)False

Question 13

If the reserve requirement for banks is fixed at 10% and the Fed wishes to decrease the money supply by $500 billion, what type of open market operation should the Fed undertake?

Accepted Answer

A)   Sell $55.56 billion in government securities
B)   Purchase $55.56 billion in government securities
C)   Sell $50.00 billion in government securities
D)   Purchase $50.00 billion in government securities

Question 14

If bank managers lobby to maintain America's traditional "dual banking" structure, they want

Accepted Answer

A)   an option of either federal or state bank chartering.
B)   to maintain the right to make loans and take deposits.
C)   the right to fight competition.
D)   the option of remaining a bank or a bank holding company.
E)   All of the above.

Question 15

U.S.bank regulators allow U.S.banks overseas to engage in all banking activities allowed by the host country.

Accepted Answer

A) True 
 B)False

Question 16

Pension funds whose contributions are not large enough to actually cover the benefits to be paid out when all employees retire are termed

Accepted Answer

A)   divested.
B)   vested.
C)   unfunded, or underfunded.
D)   funded.
E)   None of the above.

Question 17

Each of the following is classified as a thrift financial institution, except

Accepted Answer

A)   commercial bank.
B)   savings and loan association.
C)   savings bank.
D)   credit union.
E)   All of the above are thrift institutions.

Question 18

The primary regulator of investment companies, such as mutual funds, is the Securities and Exchange Commission (SEC).

Accepted Answer

A) True 
 B)False

Question 19

The Federal Open Market Committee basically establishes our nation's monetary policy.

Accepted Answer

A) True 
 B)False

Question 20

An increase in the money supply does not affect the supply of loanable funds.

Accepted Answer

A) True 
 B)False

Exam 4: Financial Intermediaries and the Banking System

The primary regulator of investment companies, such as mutual funds, is the Securities and Exchange Commission (SEC).

Correct AnswerverifiedShow Answer

What is the maximum change in total deposits at financial institutions if the Fed sells $120 billion of government securities to dealers, and the reserve requirement applicable to all deposits is 10%?

Correct AnswerverifiedShow Answer

In general, cash and marketable securities make up the largest percentage of commercial bank assets.

Correct AnswerverifiedShow Answer

A mutual fund that invests primarily in short-term, low risk securities like commercial paper and Treasury bills are called ____ mutual funds.

Correct AnswerverifiedShow Answer

If the federal reserve purchases $100 million worth of government securities in open market operations, what is the maximum amount of change in the money supply if the reserve requirement is 8% and banks hold no excess reserves?

Correct AnswerverifiedShow Answer

Fractional reserves mean that banks maintain less than 100 percent of customer deposits in liquid assets, or reserves.

Correct AnswerverifiedShow Answer

The original purpose of deposit insurance was to

Correct AnswerverifiedShow Answer

A small state bank currently has reserves equal to $300,000.If the state reserve requirement is 20%, but the bank currently maintains a 30% reserve, what amount of reserves would the bank need if it met the reserve requirements exactly?

Correct AnswerverifiedShow Answer

U.S.bank regulators allow U.S.banks overseas to engage in all banking activities allowed by the host country.

Correct AnswerverifiedShow Answer

Because life insurance companies are able to invest in corporate bonds and stocks, they provide an important source of long-term funds for companies.

Correct AnswerverifiedShow Answer

The Federal Open Market Committee basically establishes our nation's monetary policy.

Correct AnswerverifiedShow Answer

If the reserve requirement for banks is fixed at 10% and the Fed wishes to decrease the money supply by $500 billion, what type of open market operation should the Fed undertake?

Correct AnswerverifiedShow Answer

The maximum amount of FDIC deposit insurance per eligible deposit account is

Correct AnswerverifiedShow Answer

Each of the following is classified as a thrift financial institution, except

Correct AnswerverifiedShow Answer

If bank managers lobby to maintain America's traditional "dual banking" structure, they want

Correct AnswerverifiedShow Answer

An increase in the money supply does not affect the supply of loanable funds.

Correct AnswerverifiedShow Answer

Suppose the Federal Reserve increases deposits at financial institutions by $50 billion through its open market operations.If the reserve requirement for all deposits is 8%, what is the maximum impact the Fed's actions can have on total deposits?

Correct AnswerverifiedShow Answer

Financial intermediaries are the end users of the funds that they get from those who wish save money for the future.

Correct AnswerverifiedShow Answer

Which statement is not true about life insurance companies?

Correct AnswerverifiedShow Answer

Pension funds whose contributions are not large enough to actually cover the benefits to be paid out when all employees retire are termed

Correct AnswerverifiedShow Answer

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