Question 1

Holding all else constant,when a bank receives the funds for a deposited check,

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The answer of Holding all else constant,when a bank receives...

Question 2

If,after a deposit outflow,a bank needs an additional $3 million to meet its reserve requirements,the bank can

Accepted Answer

Selling $3 million of securities would provide the bank with additional funds to meet its reserve requirements. Reducing deposits or repaying discount loans would not immediately provide the necessary additional funds, and increasing loans may not be desirable if the bank is already close to its lending limit.

Question 3

When a $10 check written on the First National Bank of Chicago is deposited in an account at Citibank,then

Accepted Answer

When the $10 check from First National Bank of Chicago is deposited in a Citibank account, Citibank becomes liable to pay $10 to the depositor. Therefore, the liabilities of Citibank increase by $10. The reserves and assets of First National Bank do not change in this transaction.

Question 4

In general,banks would prefer to acquire funds quickly by ________ rather than ________.

Accepted Answer

Banks generally prefer to acquire funds quickly by borrowing from the Federal Reserve rather than reducing their loan portfolios because this allows them to maintain their lending operations and customer relationships. Reducing loans can be disruptive to both the bank's revenue and its clients.

Question 5

If a bank has $200,000 of checkable deposits,a required reserve ratio of 20 percent,and it holds $80,000 in reserves,then the maximum deposit outflow it can sustain without altering its balance sheet is

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The answer of If a bank has $200,000 of checkable...

Question 6

Using T-accounts show what happens to reserves at Security National Bank if one individual deposits $1000 in cash into her checking account and another individual withdraws $750 in cash from her checking account.

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The answer of Using T-accounts show what happens to reserves...

Question 7

A $5 million deposit outflow from a bank has the immediate effect of

Accepted Answer

When there is a $5 million deposit outflow from a bank, the bank's deposits will decrease by $5 million as customers withdraw their funds. As a result, the bank's reserves will also decrease by $5 million to meet the withdrawal demands of customers. Reserves are the funds that banks hold at the central bank to meet their deposit obligations. Therefore, choice (A) is the best option. The other choices are incorrect as they do not address the immediate effect of a deposit outflow.

Question 8

Bankers' concerns regarding the optimal mix of excess reserves,secondary reserves,borrowings from the Fed,and borrowings from other banks to deal with deposit outflows is an example of

Accepted Answer

The concern regarding the optimal mix of reserves and borrowings to deal with deposit outflows implies that bankers are managing their liquidity risk. They are trying to ensure that they have enough liquid assets (reserves) and available borrowings to meet any unexpected outflows of their deposits.

Question 9

Which of the following are primary concerns of the bank manager?

Accepted Answer

Maintaining sufficient reserves to minimize the cost to the bank of deposit outflows is a primary concern of the bank manager as it ensures the bank has enough funds to meet any immediate demands from depositors, thus minimizing the risk of a run on the bank.

Answer: D
 Maintaining high levels of capital and thus maximizing the returns to the owners is also a primary concern of the bank manager as it ensures the long-term stability and profitability of the bank.

Question 10

When $1 million is deposited at a bank,the required reserve ratio is 20 percent,and the bank chooses not to make any loans but to hold excess reserves instead,then,in the bank's final balance sheet,

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Question 11

When a $10 check written on the First National Bank of Chicago is deposited in an account at Citibank,then

Accepted Answer

When the check is deposited, the First National Bank of Chicago must transfer $10 from its reserves to Citibank, effectively reducing its liabilities because a check is a demand on the bank's liabilities.

Question 12

When $1 million is deposited at a bank,the required reserve ratio is 20 percent,and the bank chooses not to hold any excess reserves but makes loans instead,then,in the bank's final balance sheet,

Accepted Answer

The liabilities of the bank increase by $1,000,000 because the deposit itself is a liability for the bank. The bank owes this amount to the depositor.

Question 13

Of the following,which would be the first choice for a bank facing a reserve deficiency?

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The answer of Of the following,which would be the first...

Question 14

If a bank has excess reserves greater than the amount of a deposit outflow,the outflow will result in equal reductions in

Accepted Answer

Excess reserves are reserves held by a bank above the required level set by the central bank. If a bank has excess reserves greater than the amount of a deposit outflow, it can use those excess reserves to cover the outflow without needing to reduce its deposits or loans. Therefore, the outflow will result in equal reductions in deposits and reserves since the bank does not need to adjust its lending activities.

Question 15

If a bank has $100,000 of checkable deposits,a required reserve ratio of 20 percent,and it holds $40,000 in reserves,then the maximum deposit outflow it can sustain without altering its balance sheet is

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The answer of If a bank has $100,000 of checkable...

Question 16

With a 10% reserve requirement ratio,a $100 deposit into New Bank means that the maximum amount New Bank could lend is

Accepted Answer

With a 10% reserve requirement ratio, New Bank is required to keep 10% of the $100 deposit as reserves, which is equal to $10. Therefore, New Bank can only lend out $90 ($100 - $10) of the deposit. Choice A is the correct answer.

Question 17

When you deposit $50 in your account at First National Bank and a $100 check you have written on this account is cashed at Chemical Bank,then

Accepted Answer

When the $100 check is cashed at Chemical Bank, the reserves at First National Bank will fall by $100 (the amount of the check). However, since the account holder had deposited $50 before the check was cashed, the net effect is a decrease in reserves of $50. Therefore, the correct choice is C, the reserves at First National fall by $50.

Question 18

A bank with insufficient reserves can increase its reserves by

Accepted Answer

Calling in loans increases a bank's reserves because it converts loans (assets that are not liquid) into cash, which directly boosts the bank's reserves. Other options either do not directly affect reserves or, in the case of lending federal funds, would actually decrease reserves.

Question 19

________ may antagonize customers and thus can be a very costly way of acquiring funds to meet an unexpected deposit outflow.

Accepted Answer

Calling in loans may antagonize customers and lead them to withdraw their business from the bank. This can lead to further deposit outflows and ultimately result in a loss of customers and revenue for the bank. Selling securities or negotiable CDs may also result in a loss for the bank, but may not necessarily antagonize customers in the same way as calling in loans. Selling loans may not necessarily antagonize customers, but it may not be a practical solution for meeting an unexpected deposit outflow as it can take time to find buyers for the loans.

Question 20

If a bank has $10 million of checkable deposits,a required reserve ratio of 10 percent,and it holds $2 million in reserves,then it will not have enough reserves to support a deposit outflow of

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The answer of If a bank has $10 million of...

Quiz 10: Banking and the Management of Financial Institutions

Holding all else constant,when a bank receives the funds for a deposited check,

If,after a deposit outflow,a bank needs an additional $3 million to meet its reserve requirements,the bank can

When a $10 check written on the First National Bank of Chicago is deposited in an account at Citibank,then

In general,banks would prefer to acquire funds quickly by rather than .

If a bank has $200,000 of checkable deposits,a required reserve ratio of 20 percent,and it holds $80,000 in reserves,then the maximum deposit outflow it can sustain without altering its balance sheet is

Using T-accounts show what happens to reserves at Security National Bank if one individual deposits $1000 in cash into her checking account and another individual withdraws $750 in cash from her checking account.

A $5 million deposit outflow from a bank has the immediate effect of

Bankers' concerns regarding the optimal mix of excess reserves,secondary reserves,borrowings from the Fed,and borrowings from other banks to deal with deposit outflows is an example of

Which of the following are primary concerns of the bank manager?

When $1 million is deposited at a bank,the required reserve ratio is 20 percent,and the bank chooses not to make any loans but to hold excess reserves instead,then,in the bank's final balance sheet,

When a $10 check written on the First National Bank of Chicago is deposited in an account at Citibank,then

When $1 million is deposited at a bank,the required reserve ratio is 20 percent,and the bank chooses not to hold any excess reserves but makes loans instead,then,in the bank's final balance sheet,

Of the following,which would be the first choice for a bank facing a reserve deficiency?

If a bank has excess reserves greater than the amount of a deposit outflow,the outflow will result in equal reductions in

If a bank has $100,000 of checkable deposits,a required reserve ratio of 20 percent,and it holds $40,000 in reserves,then the maximum deposit outflow it can sustain without altering its balance sheet is

With a 10% reserve requirement ratio,a $100 deposit into New Bank means that the maximum amount New Bank could lend is

When you deposit $50 in your account at First National Bank and a $100 check you have written on this account is cashed at Chemical Bank,then

A bank with insufficient reserves can increase its reserves by

________ may antagonize customers and thus can be a very costly way of acquiring funds to meet an unexpected deposit outflow.

If a bank has $10 million of checkable deposits,a required reserve ratio of 10 percent,and it holds $2 million in reserves,then it will not have enough reserves to support a deposit outflow of