Question

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 percentage that is held back as collateral (C) Which of the following is an example of B above? (a) It does not apply to loans for repos, bonds and otherwise risky securities (b) It only applies to Treasuries and other safe securities (c) If a trader wants to borrow $100 for a 24-hour period, the bank will require that $105 be borrowed(D) What is the purpose of the Fed's Open Market Operations tool? (a)It used to be a practice that the Fed stopped using after the Great Depression (b) It ensures that anyone who wants a loan can get one (c) It is how the Fed ensures that banks lend money at the targeted Fed funds rate

Answer 1

>>Q.(A)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

ANS- (b)It's the interest banks charge each other for overnight loans

>>Q.(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 percentage that is held back as collateral

ANS- (c) It's a specific percentage that is held back as collateral

>>Q.(C) Which of the following is an example of B above?

(a) It does not apply to loans for repos, bonds and otherwise risky securities

(b) It only applies to Treasuries and other safe securities

(c) If a trader wants to borrow $100 for a 24-hour period, the bank will require that $105 be borrowed

ANS.(b) It only applies to Treasuries and other safe securities

>>Q.(D) What is the purpose of the Fed's Open Market Operations tool?

(a)It used to be a practice that the Fed stopped using after the Great Depression

(b) It ensures that anyone who wants a loan can get one

(c) It is how the Fed ensures that banks lend money at the targeted Fed funds rate

Ans- (c) It is how the Fed ensures that banks lend money at the targeted Fed funds rate