Question

QUESTION 1

1. The largest of the commercial banks are the "money center" banks.

   True

   False

1 points   

QUESTION 2

1. Bank of America would be considered a Regional Bank.

   True

   False

1 points   

QUESTION 3

1. The three depository institutions covered in the lecture were commercial banks, insurance companies and credit unions.

   True

   False

1 points   

QUESTION 4

1. Savings institutions were more relevant to the financial sector before the 1990s, when their deposits shrank by some 50%.

   True

   False

1 points   

QUESTION 5

1. Because of their tax advantage, credit unions can charge a slightly higher interest rate on loans and offer a slightly lower rate to depositors than is the case at a commercial bank.

   True

   False

1 points   

QUESTION 6

1. From 2008 to 2014 commercial banks saw their total loans rise in absolute value but fall as a percentage of their assets.

   True

   False

1 points   

QUESTION 7

1. From 2008 until 2014, the aggregate size of the commercial banking sector's balance sheet fell.

   True

   False

1 points   

QUESTION 8

1. From 2008 to 2014 commercial banks have dramatically boosted the deposit composition of their liabilities.

   True

   False

1 points   

QUESTION 9

1. From 2008 to 2014 commercial banks have borrowed less in absolute terms, but more as a percent of their liabilities.

   True

   False

1 points   

QUESTION 10

1. From 2014 to 2020, equity in commercial banks has varied from 10.1% to 10.9%.

   True

   False

1 points   

QUESTION 11

1. From 1990 to 2010 the number of bank offices has increased by about 50% while the number of main offices has fallen by about 50%.

   True

   False

1 points   

QUESTION 12

1. Not surprisingly, most credit unions have state charters.

   True

   False

1 points   

QUESTION 13

1. Banks employing the "real bills" doctrine to manage its activities makes very safe loans that earn very high profits.

   True

   False

1 points   

QUESTION 14

1. The "shiftability" theory is designed to manage the credit risk associated with bad loans.

   True

   False

1 points   

QUESTION 15

1. The main problem with the "shiftability" theory of bank management is that when everyone is liquidating their Treasury bonds at the same time, it will depress their value and the bank will lose money, further weakening its balance sheet.

   True

   False

1 points   

QUESTION 16

1. The installment loan is the key component of the "conversion of funds" theory.

   True

   False

1 points   

QUESTION 17

1. The "conversion of funds" approach to bank management allow for the minimization of interest rate risk.

   True

   False

1 points   

QUESTION 18

1. The "conversion of funds" approach to bank management requires that the maturity of a bank's liabilities be matched up, dollar-for-dollar, with the bank's assets.

   True

   False

1 points   

QUESTION 19

1. "Gap" management is used as a tool to maximize profits when one is forecasting interest rates to change in a particular way.

   True

   False

1 points   

QUESTION 20

1. If you expect interest rates to fall, gap management analysis would tell you that you should work to make the gap positive – interest sensitive liabilities being greater than interest sensitive assets.

   True

   False

Answer 1

'The largest of the commercial banks are the money center banks'. It is true.

There are mainly four types of bank in the U. S economy. They are,

1.Commercial bank - It acts as an intermediary between depositors and borrowers. The main service they provide is accepting deposits and lending funds.

2. Savings bank - It is a bank exclusive for savings

3. Savings and loans - It accepts savings and lending this funds to the needy in the form of mortgage loans and other loans.

4. Credit unions - It is owned and operated by its members. They provide loans at cheaper rates.

Money center banks are located in major economic cities like Hong Kong, Londo, Newyork and Tokyo.

MCBs maily deals with business corporations, government and banks.They do not deal with individual customers.

Main operations of MCBs are,

1. Portfolio business- They acquires assets , secritiesa fund on the interest of banks.

2. Trading- They trade securities and assets in national and international markets.

3. Corporate finance- They charge a fee from the clients for their services ( helps to acquire loans and other credit products.)

4. Distribution- They deals with the selling of bank securities, commercial papers and participate in bank loans.

The major MCBs in the U. S are, bank of america, Jp Morgan etc