Question 1

Early European banks were places for safekeeping of wealth because:

Accepted Answer

Early European banks were often used as places for safekeeping of wealth because there was a lot of instability and insecurity during those times. Many people lost their savings and wealth due to constant wars, theft, and expropriation by governments. Therefore, people turned to banks as a safe option to store their wealth.

Question 2

Which of the following is considered a fringe bank?

Accepted Answer

Payday lenders are considered fringe banks as they specialize in providing small loans to individuals who may not have access to traditional banking options. These loans often come with high interest rates and fees, making them controversial in the financial industry. Community banks, wholesale banks, and merchant banks are all considered traditional banks.

Question 3

Jonathan Robbins has an account in a bank that does not have a physical branch.Jonathan does all of his banking business over the Internet.What type of bank does Jonathan have his account at?

Accepted Answer

Jonathan does all of his banking business over the Internet which implies that his bank does not have a physical branch. Such banks that operate entirely online are called virtual banks.

Question 4

Drew Davis goes to his local bank to get help developing a financial plan and making investment decisions.Which of the more recent services banks offer is Drew taking advantage of?

Accepted Answer

Drew is taking advantage of the financial advice service offered by the bank.

Question 5

The First National Bank of Lakeland makes risky loans to businesses to expand and grow their businesses while at the same time issuing low-risk securities to their depositors and other fund providers.Which of the following services is this bank offering to their customers?

Accepted Answer

The answer of The First National Bank of Lakeland makes...

Question 6

The Bank,N.A.accepts deposits from thousands of individuals and lends that money to (among others)the Stillwater Body Shop to expand their work bays.Which of the following roles is the bank performing?

Accepted Answer

The bank is performing the intermediation role, as it is accepting deposits from individuals and lending that money to the Stillwater Body Shop for expansion. Intermediation refers to the process of channeling funds between borrowers and lenders.

Question 7

The Charleston Southern Bank makes loans for families to purchase new and existing homes but does not take deposits.What type of bank is this most likely to be?

Accepted Answer

A mortgage bank specializes in providing loans for mortgages and does not generally accept deposits. Given the focus on making loans for families to purchase new and existing homes, it is likely that Charleston Southern Bank is a mortgage bank.

Question 8

Bank equipment leasing activity involves:

Accepted Answer

Bank equipment leasing activity involves a bank buying equipment and then leasing it to a customer. This allows the customer to use the equipment without having to make a large upfront investment, while the bank earns income through the lease payments.

Question 9

Jonathan Wynn knows that if he wanted to purchase a Treasury Bill,the minimum amount he would spend would be close to $10,000.He also knows that he could deposit $1,000 in a money market deposit account at a bank and earn about the same rate of interest.Jonathan does not have $10,000 to invest in a Treasury Bill.If Jonathan puts his money in the bank,which service that a bank can provide,is he taking advantage of?

Accepted Answer

Jonathan is taking advantage of the divisibility of money services, as he can invest a smaller amount ($1,000) in a money market deposit account instead of needing the larger amount ($10,000) required for a Treasury Bill.

Question 10

Chris Jones gets a cashier's check from Wachovia Bank to make his down payment on a new home.Which of the following roles is the bank performing?

Accepted Answer

The bank is performing the payments role by issuing the cashier's check for Chris Jones to make his down payment on a new home.

Question 11

Major trends affecting the performance of financial firms today include all of these except:

Accepted Answer

The other four options (A, C, D, and E) are all major trends affecting the performance of financial firms today. However, reduced branching is not a trend; in fact, many financial institutions are expanding their physical branch network or investing in digital channels to better serve customers.

Question 12

Wholesale banks are those banks that:

Accepted Answer

Wholesale banks typically serve corporations and government entities and are specifically designed to meet their unique financial needs. They offer services such as syndicated loans, structured financing, cash management, foreign exchange, and investment banking. They do not typically cater to retail customers or sell at a discount to other commercial banks.

Question 13

Nick Rodr gets a loan from the First State Bank of Guthrie to purchase a new refrigerator for his condo.What service that a bank provides is he taking advantage of?

Accepted Answer

Nick Rodr is taking advantage of the credit services offered by the First State Bank of Guthrie by obtaining a loan to purchase a new refrigerator for his condo. With credit services, the bank provides loans and credit to individuals or businesses, allowing them to make purchases or investments they might not be able to otherwise afford.

Question 14

Banks like the Medici Bank in Italy and the Hochstetter Bank in Germany were successful because __________ and they responded well to these new needs.

Accepted Answer

The Industrial Revolution demanded new methods of making payments and obtaining credit, which banks like the Medici Bank in Italy and the Hochstetter Bank in Germany recognized and responded well to, leading to their success. Option A is incorrect because banks generally prefer to give loans to customers with good credit, rather than high interest loans to high-risk customers. Option B is incorrect because banks like the Medici Bank catered to both wealthy and middle-class customers. Option D is incorrect because banks were often controlled by the government at the time. Option E is incorrect because only option C is correct.

Question 15

The U.S.government wants to prevent money laundering by drug cartels.To promote this goal,they have asked banks to report any cash deposits greater than $10,000 to the government.Which of the following roles is the bank performing?

Accepted Answer

The bank is performing the policy role by adhering to government regulations aimed at preventing illegal activities such as money laundering. This involves implementing and following policies that are in line with governmental objectives, in this case, reporting large cash transactions to help combat money laundering by drug cartels.

Question 16

Alexander Phua goes to his local bank and gets an insurance policy that protects him against loss in case he is in a car accident.Which of the following roles is the bank performing?

Accepted Answer

The bank is performing the risk management role by providing Alexander Phua with an insurance policy that protects him against loss in case of a car accident.

Question 17

The Edmond National Bank serves only the City of Edmond,Oklahoma and concentrates on providing the best possible service to this city.What type of bank is this most likely to be?

Accepted Answer

The bank serves only the City of Edmond, which indicates that it is a community bank. Community banks focus on serving a specific geographic area and building relationships with customers in that area, rather than offering services on a national or international scale.

Question 18

The Edmond Wine and Cheese shop wants to buy 30 cases of French Champagne on credit.Bank of America writes a letter of credit stating that the Edmond Wine and Cheese shop is a good risk and that if they do not pay off the loan,Bank of America will.Which of the following roles is the bank performing?

Accepted Answer

The bank is performing the guarantor role by agreeing to pay off the loan if the Edmond Wine and Cheese shop does not.

Question 19

Religious opposition decreased during the Renaissance because:

Accepted Answer

The question does not seem to be related to religious opposition, but rather to banking practices during the Renaissance. Option B explains that loans and deposits primarily consisted of wealthy customers, which implies that the banking industry was not as accessible to the poor.

Question 20

During the middle ages,banks encountered religious opposition because:

Accepted Answer

During the Middle Ages, charging interest on loans was considered usury and was against Christian teachings. Banks were seen as exploitative institutions, especially when they charged high interest rates on loans to the poor. This religious opposition often made it difficult for banks to operate and gain acceptance in society.

Quiz 1: An Overview of the Changing Financial-Services Sector