Question :
20.3 Banking and Financial Fragility
1) For the following question, assume : 1303702
20.3 Banking and Financial Fragility
1) For the following question, assume the following facts:
(1)Chase (which is located in the United States) has a 20% reserve requirement imposed by the government.
(2)Bank of Germany has no reserve requirements.
(3)Both banks may invest at an 8% interest rate.
(4)Both banks have fixed costs of $3 per deposit made.
What is the difference between the minimum interest rates each bank can offer and still make a profit if the deposit is $500 for 1 year?
A) 0 – Both banks can offer the same rate.
B) 1%
C) 1.6%
D) 0.4%
E) 20%
2) Which of the following statements is TRUE?
A) Bank failure is limited to banks that have mismanaged their assets.
B) Bank failure is limited to banks that have invested in real estate.
C) Bank failure is limited to banks that have invested in government bonds.
D) Bank failure is limited to a few banks.
E) Bank failure is NOT limited to banks that have mismanaged their assets.
3) Which of the following statements is TRUE?
A) Bank failures inflict serious financial harm on individual depositors.
B) Bank failures do not inflict serious financial harm on individual depositors.
C) Bank failures inflict not only serious financial harm on individual depositors, but also harm the macroeconomic stability of the economy.
D) Bank failures inflict serious financial harm on individual depositors, but fortunately do not harm the macroeconomic stability of the economy.
E) Bank failures only inflict serious financial harm on the macroeconomic stability of the economy.
4) Which of the following statements is TRUE for the U.S.?
A) The Federal Deposit Insurance Corporation (FDIC) insures bank deposits against losses up to $250,000.
B) The Federal Deposit Insurance Corporation (FDIC) insures bank deposits against losses up to $100,000.
C) The Federal Deposit Insurance Corporation (FDIC) insures bank deposits against losses up to $10,000.
D) The Federal Deposit Insurance Corporation (FDIC) insures bank deposits against natural disaster up to $100,000.
E) The Federal Deposit Insurance Corporation (FDIC) insures bank deposits against floods up to $100,000.
5) Which of the following statements is TRUE for the U.S.?
A) Federally chartered banks are required to make contributions to the FDIC to cover the cost of bank
deposits insurance.
B) Federally chartered banks are not required to make contributions to the FDIC to cover the cost of bank deposits insurance.
C) The States are not required to make contributions to the FDIC to cover the cost of bank deposits insurance for banks with their main branch in that State.
D) The States are required to make contributions to the FDIC to cover the cost of bank deposits insurance for banks with their main branch in that State.
E) The specific municipality where the main branch of the bank is located is required to make contributions to the FDIC to cover the cost of bank deposits insurance.
6) Which of the following statements is TRUE for the U.S.?
A) The FDIC does not provide insurance for deposits for Savings and Loans (S&L) associations.
B) The FDIC does provide insurance for deposits for Savings and Loans (S&L) associations, but only up to $50,000.
C) The FDIC does provide insurance for deposits for Savings and Loans (S&L) associations up to $250,000.
D) The FDIC does provide insurance for deposits for Savings and Loans (S&L) associations up to $150,000.
E) The FDIC does provide insurance for deposits for Savings and Loans (S&L) associations up to $100,000.
7) Banks in the U.S.
A) face rules against lending too large a fraction of their assets to a single private customer only.
B) face rules against lending too large a fraction of their assets to a single private customer or to a single foreign government borrower.
C) face rules against lending too large a fraction of their assets to a single foreign government borrower only.
D) face rules against lending to too many foreign organizations and corporations.
E) face rules against lending to other banks.
8) Banks in the U.S.
A) cannot hold common stocks.
B) can hold common stocks.
C) cannot hold common stocks of companies they do business with.
D) cannot hold common stocks of companies that have their headquarters in the same state.
E) can hold risky assets.
9) Banks in the U.S.
A) are prevented from holding assets that are “too risky.”
B) are not prevented from holding assets that are “too risky.”
C) are encouraged not to hold assets that are “too risky.”
D) are not encouraged not to hold assets that are “too risky.”
E) are encouraged to lend to a single private customer.
10) In the U.S., the following agencies have the right to examine the bank’s books
A) Fed and the FDIC.
B) FDIC and the Office of the Comptroller of the Currency.
C) Fed and the Department of Commerce
D) FDIC, Fed and the Office of the Comptroller of the Currency.
E) Only the Fed.
