1. Explain the basic functions and the characteristics of financial market
2. What are the three functions of money?
3. What is the future value of a $100 deposit earning interest at 7% for the next two years?
4. Explain the effect on the future value when interest rate increases (or decreases)
5. Distinguish the difference between real and nominal interest rates.
6. What factors will shift the demand of bonds?
7. What factors will shift the supply of bonds?
8. What items are reported as assets for a bank? What items are reported as liabilities for a bank?
9. If a bank has $400,000 of checkable deposits, a required reserve ratio of 20%, and it holds $160,000 in reserves, then the maximum deposit outflow it can sustain is?
10. Explain the following terms:
a. Adverse selection
b. Moral hazard
11. What are off-balance-sheet activities of a bank?
12. What is the contagion effect?
13. Explain why banks engage in financial engineering?
14. What the functions of Federal Reserve?
15. Explain why the Federal Reserve is independent?
1. Explain the basic functions and the characteristics of financial market
2. What are the three functions of money?
3. What is the future value of a $100 deposit earning interest at 7% for the next two years?
4. Explain the effect on the future value when interest rate increases (or decreases)
5. Distinguish the difference between real and nominal interest rates.
6. What factors will shift the demand of bonds?
7. What factors will shift the supply of bonds?
8. What items are reported as assets for a bank? What items are reported as liabilities for a bank?
9. If a bank has $400,000 of checkable deposits, a required reserve ratio of 20%, and it holds $160,000 in reserves, then the maximum deposit outflow it can sustain is?
10. Explain the following terms:
a. Adverse selection
b. Moral hazard
11. What are off-balance-sheet activities of a bank?
12. What is the contagion effect?
13. Explain why banks engage in financial engineering?
14. What the functions of Federal Reserve?
15. Explain why the Federal Reserve is independent?
For unlimited access to Homework Help, a Homework+ subscription is required.
Related textbook solutions
Related questions
QUESTION 31
The Board of Governors of the Federal Reserve System is
composed of seven members who are appointed by the President and approved by the Senate. | ||
composed of 12 members of the Senate and the U.S. House of Representatives. | ||
elected by the general public. | ||
composed of representatives from the country's 12 largest commercial banks. |
1.11 points
QUESTION 32
The Fed is said to be the "lender of last resort" in that
it charges a higher interest rate to borrowers than does any other bank. | ||
it functions as the government's bank only when commercial banks fail to do so. | ||
it makes loans to individuals whom commercial banks do not believe are credit-worthy. | ||
it stands ready to lend to any depository institution that it has decided should not fail. |
1.11 points
QUESTION 33
The Federal Reserve System acts as the government's fiscal agent by
providing checking account services for the government. | ||
preparing the budget the President presents to Congress every year. | ||
determining how to finance a deficit. | ||
auditing taxpayers. |
1.11 points
QUESTION 34
The Federal Reserve System was established in which year?
1913. | ||
1929. | ||
1865. | ||
1941. |
1.11 points
QUESTION 35
By serving as the lender of last resort,
the Fed provides check clearing services. | ||
the Fed aids in the sale of government securities. | ||
the Fed supervises depository institutions. | ||
the Fed can prevent bank failures. |
1.11 points
QUESTION 36
Depository institutions must
use and pay for the services of the Federal Reserve System. | ||
set their interest rates according to schedules established by the Federal Reserve System. | ||
keep a certain percentage of their deposits as reserves. | ||
turn over a percentage of their profits to the Federal Reserve System as payment for services provided by the Fed. |
1.11 points
QUESTION 37
The Federal Reserve System has
50 district banks. | ||
24 district banks. | ||
12 district banks. | ||
7 district banks. |
1.11 points
QUESTION 38
The part of the Federal Reserve System (the Fed) that holds the reserve balances of depository institutions is
the Board of Governors. | ||
the Federal Advisory Committee. | ||
the Federal Open Market Committee. | ||
the Federal Reserve district banks. |
1.11 points
QUESTION 39
The potential for a financial breakdown at one financial institution to spread throughout the financial system is known as a
systemic risk. | ||
liquidity risk. | ||
lending risk. | ||
moral hazard. |
1.11 points
QUESTION 40
A system in which depository institutions hold reserves that are less than the amount of total deposits is called
fiat money banking. | ||
required reserve banking. | ||
fractional reserve banking. | ||
central banking system. |
1.11 points
QUESTION 41
Total reserves of private banks are
all customer deposits. | ||
the minimum amount banks need to hold against time deposits. | ||
federal reserve notes. | ||
deposits held at the Fed and vault cash. |
1.11 points
QUESTION 42
A statement of assets and liabilities of any business entity is called
a cash flow statement. | ||
an income statement. | ||
a balance sheet. | ||
a statement of net worth. |
1.11 points
QUESTION 43
Which of the following actions has no effect on the total money supply?
The Federal Open Market Committee buys government securities. | ||
There is a transfer of deposits from one bank to another bank. | ||
There is change in the money multiplier. | ||
The Federal Open Market Committee sells government securities. |
1.11 points
QUESTION 44
Given a required reserve ratio of 20 percent, a commercial bank that has received a new deposit of $100 can make additional loans of
$80. | ||
$0. | ||
$400. | ||
$20. |
1.11 points
QUESTION 45
The Federal Open Market Committee has responsibility for
appointing members to the Board of Governors of the Federal Reserve system. | ||
issuing orders to buy or sell government securities for the Fed. | ||
advising the Treasury Department on monetary policy. | ||
printing money. |