1. A bank can safely reduce its amount of reserves if: A. there is little chance
ID: 2735947 • Letter: 1
Question
1. A bank can safely reduce its amount of reserves if:
A. there is little chance that its depositors will make large withdrawals B. it is balanced by a large amount of loans C. the federal funds rate is very high D. interest rate fall
2. congress passed the Credit Card Accountability and Responsibility, and Disclousure Act in order to:
A. restrict the fee imposed on credit card users. B. Require credit card users to reduce the use of their credit cards C. require the banks to provide credit cards to students and other customers with a low income. D. prevent banks from imposing a fee when transferring a balance from another credit card
3. Banks often have to sell their loans at fire-sale prices
A. because they know more about the borrower than the institution buying the loan B. when their assets exceed their net worth C. because they wish to increse their profits D. they wish to increse their borrowing from the Ferderal Reserve
4. The increased use of credit card has led to:
A. an increase us of ATM cards B. a decline in consumer loans C. an increase in consumer loans D. higher rate of inflation
5. By law, bankss are restricted to hold securities with __________ risk, for example, ____________
A. low; junk bonds B. low; treasury bonds C. high; treasury bonds D. high, junk bonds
6. With the decline in commercial and investment loans has come an increase in
A. federal fund loans B. car loans C. real estate loans D. all of the answer are correct
7. Which of the following is a risk faced by banks
A. free-rider risk B. adverse risk C. credit (or default) risk D. moral risk
8. Holding profits and assets constant, an increase in a bank's capital ____ the bank's equity ratio and _____ the bank's return on equity
A. reduce; reduce B. reduce; increase C. increase; reduces D. increases; increases
9. The fall in housing prices during the financial crisis cased by many homeowners to:
A. have a mortgage whose value was worth less than the house B. walk away from their houses C. decide to take out a home equity loan D. All of the anwsers are correct
Explanation / Answer
I will answer only four parts
7Which of the following is a risk faced by banks
Credit risk is afce by banks because the loans they have given can default
8Holding profits and assets constant, an increase in a bank's capital ____ the bank's equity ratio and _____ the bank's return on equity
Equity ratio = equity/ assets as assets is constant so equity ratio increase
Return on equity = Nte profit/Equity as profit is same returns on equity would be lower
9 The fall in housing prices during the financial crisis cased by many homeowners to:
walk away from their houses
Because the mortgae value was gerater than the valeu of house so wit was felt that leave the house and let us default on mortgage
5 By law, bankss are restricted to hold securities with __________ risk, for example,
low; junk bond
6The increased use of credit card has led to
The increased use of credit card has led to because people have a amchine which gives them loan anytime
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