Question 1

When the government collects taxes or sells Treasuries,it usually directs these funds into TT&L deposits first:
A)as per the directions of the supreme court.
B)to repay for the money borrowed earlier.
C)to minimize the impact of operations on the financial system.
D)to decrease the money supply in the economy.
E)to neutralize the impact of operations on the financial system.

Accepted Answer

The government directs these funds into TT&L (Treasury Tax and Loan) deposits first to minimize the impact of operations on the financial system. This helps to keep the banking system stable and prevents disruptions in the money market. TT&L deposits are special accounts held at Federal Reserve Banks that the government uses for its own cash management purposes. By depositing tax and Treasury sale proceeds into these accounts first, the government can better manage its cash flows without affecting the broader financial system.

Question 2

_____________________ permits a customer to preauthorize a depository institution to move funds from a savings account to a transaction account in order to cover overdrafts.
A)Automatic transfers (ATS)
B)Sweep account
C)NOW account
D)SNOW account
E)MMDA

Accepted Answer

Automatic transfers (ATS) allow customers to preauthorize their financial institution to transfer funds from their savings account to their transaction account in the event of an overdraft. This helps to avoid potential fees and ensure that payments are covered.

Question 3

In determining the balance on which interest earnings are figured,a depository institution must use the ___________________ in the deposit.
A)minimum balance amount
B)maximum balance amount
C)full amount of the principal
D)average monthly balance
E)average daily balance

Accepted Answer

The answer of In determining the balance on which interest...

Question 4

Recently,time deposits have been issued with interest rates adjusted periodically (such as every 90 days).This time period is known as:
A)roll period.
B)maintenance period.
C)computation period.
D)maturity period.
E)reserve period.

Accepted Answer

The roll period refers to the period of time after which the interest rate on a time deposit is adjusted or rolled over. It is typically around 90 days, but can vary depending on the terms and conditions of the particular deposit. During the roll period, the interest rate is fixed and does not change, but once it ends, the rate will be adjusted to reflect the current market conditions. Therefore, choice A is the correct answer.

Question 5

According to the textbook,one of the reasons why large banks in the recent years have acquired many smaller banking firms is:
A)to avoid stringent regulatory norms.
B)to gain access to more stable and less expensive deposits.
C)to increase their credit ratings.
D)to increase their geographical presence.
E)to diversify their customer base.

Accepted Answer

To gain access to more stable and less expensive deposits.

Question 6

While demand deposits have about the same gross expenses per dollar of deposit as time deposits do,the _____________ levied against transaction account customers help to lower the net cost of checkable deposits.
A)higher account opening fees
B)higher service fees
C)higher pre-closure fees
D)lower interest rates
E)less number of services

Accepted Answer

Demand deposit accounts typically have lower interest rates than time deposits, but they also generate revenue through service fees such as ATM fees, overdraft fees, and monthly maintenance fees. These fees help to offset the cost of providing checkable deposit services and can lower the net cost of maintaining demand deposit accounts relative to time deposits. Therefore, the higher service fees levied against transaction account customers can help to lower the net cost of checkable deposits.

Question 7

The degree of risk exposure,based on which the amount of insurance premiums paid by each FDIC-insured depository is determined,is an interplay of two factors-risk class to which the institution belongs to and:
A)capital adequacy
B)net non-performing assets
C)gross non-performing assets
D)percentage of total liabilities hedged
E)open swap exposures

Accepted Answer

Capital adequacy is a key factor, along with the risk class of the institution, in determining the degree of risk exposure for FDIC-insured depositories. This, in turn, influences the amount of insurance premiums paid by each institution.

Question 8

Offering institutions post lower yields on SNOWs than on MMDAs because:
A)ratings on institutions issuing SNOWs are higher.
B)SNOWs can be drafted more frequently by customers.
C)federal regulatory authorities classify MMDAs as transaction deposits.
D)MMDAs carry unlimited check-writing privileges.
E)MMDAs have longer maturities than SNOWs.

Accepted Answer

The answer of Offering institutions post lower yields on SNOWs...

Question 9

Returns on certificates of deposits linked to performance of stock markets are known as:
A)equity CDs.
B)stock CDs.
C)market CDs.
D)index CDs.
E)exchange CDs.

Accepted Answer

Returns on certificates of deposits linked to performance of stock markets are known as Index CDs.

Quiz 12: Managing and Pricing Deposit Services

When the government collects taxes or sells Treasuries,it usually directs these funds into TT&L deposits first:

_____________________ permits a customer to preauthorize a depository institution to move funds from a savings account to a transaction account in order to cover overdrafts.

In determining the balance on which interest earnings are figured,a depository institution must use the ___________________ in the deposit.

Recently,time deposits have been issued with interest rates adjusted periodically (such as every 90 days) .This time period is known as:

According to the textbook,one of the reasons why large banks in the recent years have acquired many smaller banking firms is:

While demand deposits have about the same gross expenses per dollar of deposit as time deposits do,the _____________ levied against transaction account customers help to lower the net cost of checkable deposits.

The degree of risk exposure,based on which the amount of insurance premiums paid by each FDIC-insured depository is determined,is an interplay of two factors-risk class to which the institution belongs to and:

Offering institutions post lower yields on SNOWs than on MMDAs because:

Returns on certificates of deposits linked to performance of stock markets are known as: