Commercial banks purchase more tax-exempt securities in periods when loan losses are high.

Question

Quizplus · Accepted Answer

Commercial banks typically purchase tax-exempt securities, such as municipal bonds, for their tax advantages and not necessarily in response to high loan losses. Their investment strategies are more influenced by interest rates, tax considerations, and the overall economic environment rather than directly by their loan loss experiences.

Commercial Banks Purchase More Tax-Exempt Securities in Periods When Loan