Question

In: Finance

The main use of bank funds is ? A. repurchase agreements B. loans C. fixed assets...

The main use of bank funds is ?

A. repurchase agreements

B. loans

C. fixed assets

D. investments securities

Solutions

Expert Solution

The Correct answer is B. Loans

The primary objective of Banks is to accept deposit from public and grant loans to the public. The loans that are granted to the public are usually charged at an interest. The Interest income is one of the sources of income of the banks. If a person requires a loan he would have to ask bank to provide him with such financial assistance. The bank would open an account in the name of the borrower and credit the sum of loan to his account. The banks also provide loans to firms. These loans helps the firms to expand their operations and achieve the desired growth. Loans provided by the banks play an important role in developing the economy of a country.

Banks usually keep a certain portion of their deposits and lend the rest as loans. These deposits are kept to cater the demand to their customers when they would require to withdraw money.

Therefore it can be concluded that the main use of bank funds is loans.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Reverse Repurchase Agreements On 3 February 2020, China’s central bank, the People’s Bank of China (PBOC),...
Reverse Repurchase Agreements On 3 February 2020, China’s central bank, the People’s Bank of China (PBOC), conducted the largest single-day reverse repo operation in its his- tory. The PBOC injected a total of 173.81 billion USD into the money mar- kets through reverse bond repurchase agreements, which is the purchase of bonds with the agreement to sell them at a higher price at a specific future date. Use a diagram showing the exchange rate, the expected currency re- turns, and...
What is the Federal Funds Rate? (a)The rate banks charge their non-bank customers for short-term loans(b)...
What is the Federal Funds Rate? (a)The rate banks charge their non-bank customers for short-term loans(b) It's the interest banks charge each other for overnight loans (c) The maximum rate of interest that controlled by the government (B) In the central banking world, what is meant by the term margin? (a) It's how much money a bank can safely lose and still profitable (b) It's a term use more in the Stock Market than in banking (c) It's a specific...
If interest is expected to rise, should a bank issue loans at a fixed rate or...
If interest is expected to rise, should a bank issue loans at a fixed rate or variable rate? Why?
Consider a bank that has the following assets and liabilities: Loans of $100 million with a...
Consider a bank that has the following assets and liabilities: Loans of $100 million with a realized rate of 5% Security holdings of $50 million earning 10% interest income Reserves of $10 million Savings accounts of $100 million interest of 2.5% Checking deposits of $30 million which pay no interest Determine the profits for this bank. (Hint: The bank earns income, or revenues, not only from its loans but also from any securities it holds!)
Consider a bank that has the following assets and liabilities: Loans of $100 million with a...
Consider a bank that has the following assets and liabilities: Loans of $100 million with a realized rate of 5% Security holdings of $50 million earning 10% interest income Reserves of $10 million Savings accounts of $100 million interest of 2.5% Checking deposits of $30 million which pay no interest Set up the balance sheet for this bank. (Hint: Remember that assets + liabilities = equity or net worth!) Determine the profits for this bank. (Hint: The bank earns income,...
Consider a bank that has the following assets and liabilities: Loans of $100 million with a...
Consider a bank that has the following assets and liabilities: Loans of $100 million with a realized rate of 5% Security holdings of $50 million earning 10% interest income Reserves of $10 million Savings accounts of $100 million interest of 2.5% Checking deposits of $30 million which pay no interest Carefully explain what the impact would be on a bank’s ROA and ROE from increased use by a bank of off-balance sheet (OBS) activities.
Why are loans such a high percentage of total assets at the typical bank? What four...
Why are loans such a high percentage of total assets at the typical bank? What four broad classes of loans do banks engage in? Most non-financial firms would never hold as much of their assets in safe liquid securities as banks do. Why do banks maintain such a high percentage of investment in securities?
What are the main components of money supply? (b) How can the Bank of Ghana use...
What are the main components of money supply? (b) How can the Bank of Ghana use its prime rate, open market operations and the required reserve ratio to control money supply? c). State and briefly explain the main objectives of monetary policy? d) What is the relation between the required reserve ratio and the money multiplier?
There are three assets A, B and C. The returns for shares A, B and C...
There are three assets A, B and C. The returns for shares A, B and C over the next year have expected values 9%, 6%, 5% respectively. The standard deviations for A, B and C are 30%, 25% and 20% respectively. The covariance between these A and B is 0.0375, the covariance between A and C is -0.018, the covariance between B and C is -0.03. Ben currently has invested 40%, 40%, 20% in shares A, B and C respectively....
There are three assets A, B and C. The returns for shares A, B and C...
There are three assets A, B and C. The returns for shares A, B and C over the next year have expected values 10%, 5%, 3% respectively. The standard deviations for A, B and C are 30%, 25% and 20% respectively. The covariance between these A and B is 0.0375, the covariance between A and C is -0.018, the covariance between B and C is -0.03. Ben currently has invested equal amounts of his portfolio in shares A, B and...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT