Chapter 7 Federal Reserve System Questions 1,2,3,4,10,11,12,14

1. Describe the functions performed by Federal Reserve banks. (LG 4-1)

2. Define the discount window and the discount rate (LG 4-2)

3. Describe the structure of the board of Governors of the federal Reserve System (LG 4-2)

4. What are the primary responsibilities of the Federal reverse Board? (LG 4-1)

10. What are the tools used by the Federal Reserve to implement monetary policy? (LG4-3)

11. Explain how a decrease in the discount rate affects credit availability and the money supply? (LG 4-3)

12. Why does the Federal Reserve rarely use the discount rate to implement its monetary policy? (LG4-3)

14. Which of the monetary tools available to the Federal Reserve is most often used? Why? (LG4-3)

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Chapter 8 Commercial Banks Questions 2,7,11,12,14

2. What are the major sources of funds for commercial banks in the United States? What are the major uses of funds for commercial banks in the United States? For each of your answers, specify where the item appears on the balance sheet of typical commercial bank. (LG 11-2, LG 11-3)

7. What are the three major segments of deposit funding? How are these segments changing over time? Why? What strategic impact do these changes have on the profitable operation of a bank? (LG 11-3)

11. What is meant by an off-balance-sheet activity? What are some of the forces responsible for them? (LG 11-4)

12. How does one distinguish between an off-balance-sheet asset and an off-balance-sheet liability? (LG 11-4)

14.What are the main off-balance-sheet activities undertaken by commercial banks? (LG 11-4)

  Chapter 9 Commercial Banks Financial Statements Questions 2,3,5,6,13

2. Match these three types of cash balances with the functions that they serve: (LG12-1)

1. Vault cash (1) Used to meet legal reserve requirements
2. Deposits at (2) Used to purchase services

The Federal (3) Used to meet customer withdrawals Reserve

1. Deposits at other FIs

3. Classify the following accounts into one of the following categories: (LG 12-1, LG12-2, LG12-3, LG12-4)

1. Assets
2. Liabilities
3. Equity
4. Revenue
5. Expense
6. Off-balance-sheet activities

(1)  Services fees charged on deposit accounts

(2)  Retail CDs

(3)  Surplus and paid-in capital

(4)  Loan commitments

(5)  Consumer loans

(6)  Federal funds sold

(7)  Swaps

(8)  Interest on municipals

(9)  Interest on NOW accounts

(10)         NOW accounts

(11)         Commercial letters of credit

(12)         Leases

(13)         Retained earnings

(14)         Provision for loan losses

(15)         Interest on U.S, Treasury securities

5. Repurchase agreements are listed as both assets on liabilities in Table 12-1. How can an account be both an asset and a liability? (LG 12-1, LG 12-2)

6. How does a NOW account differ from a demand deposit? (LG12-2)

13.  What is the likely relationship between the interest income ration and the noninterest income ratio? (LG 12-5)

Chapter 10 Regulation of Commercial Banks Questions 1,9,11,12,14

1.What forms of protection and regulation are imposed by regulators of CBs to ensure their safety and soundness? (LG 13-1)

9. How is the leverage ratio for a bank defined? (LG 13-7)

11. Identify and discuss the weaknesses of the leverage ratio as a measure of capital adequacy. (LG 13-7)

12. What is the Basel Agreement? (LG 13-7)

14. What is the total risk-based capital ratio? (LG 13-7)

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