FIN 320 Ch. 12 Flashcards - Quizlet

12/16/21, 2:47 PM FIN 320 Ch.
12 Flashcards | Quizlet
FIN 320 Ch. 12 Study
Social Sciences / Economics / Finance
FIN 320 Ch. 12

Terms in this set (33)
A wholesale bank is one that True

focuses its business activities
on commercial banking
relationships.
Composite rating 5 is the rating False

for the soundest financial
institutions.
Banks have higher leverage True

than most manufacturing firms.
Loans to consumers and to False

individuals are jointly termed
C&I loans on a bank's balance
sheet.
MMDAs are a type of savings True

account that has some limited
checking features. These
accounts were designed to
help banks compete with
MMMFs.
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12/16/21, 2:47 PM FIN 320 Ch. 12 Flashcards | Quizlet
FIN 320 are

C&I loans Ch.loans
12 to TRUE Study
businesses used to finance

capital needs, equipment
purchases, and plant
expansions.
The provision for loan loss FALSE

account is actual loan losses
less loan recoveries in a given
time period.
The allowance for loan and True

lease losses is bank
management's estimate of the
amount of gross loans and
leases that will not be repaid to
the bank.
In ratio analysis, the profit True

margin times the asset
utilization ratio equals return
on assets
Loans are the major item on a True

bank's balance sheet, and they
generate the largest amount of
revenue.
Both retail and wholesale CDs False

are negotiable instruments
despite their different
denominations.
FIN
Banks320 Ch. 12
generally pay higher FALSE Study
interest rates on NOW

accounts than on MMDAs
Wholesale CDs obtained from True

an investment house rather
than directly from a customer
are referred to as brokered
deposits
At almost all banks noninterest False

expense is greater than
noninterest income; hence, the
overhead efficiency ratio is
usually greater than 100
percent.
Rate-sensitive funding sources FALSE

at a bank are termed core
deposits.
Core deposits are deposits that very stable funds sources.

are
A. at the bank solely for the

interest rate earned.
B. very stable funds sources.
C. typically for larger

denominations than hot money
sources.
D. very frequently turned over.
FIN 320 Ch. firm

A construction 12 cannot II or III Study
obtain the necessary permits

to begin building a shopping
mall until it can show it either
has or will have the necessary
funding to complete the
project. The firm may ask a
bank for which of the following
to allow it to obtain the
permits?
I. Commercial letter of credit
II. Loan commitment
III. Credit line
IV. Repurchase agreement
FIN 320
Which oneCh. 12following is
of the (Interest income - Interest expense)/Earning assets
Study
the definition of the NIM?
A. (Net interest income - Net

noninterest income)/Earning
assets
B. Net interest income/Interest-

bearing liabilities
C. (Interest income - Interest

expense)/Earning assets
D. (Interest income - Interest

expense)/Interest-bearing
liabilities
E. (Interest income/Earning
assets) - (Interest
expense/Interest-bearing
liabilities)
Uniform principles, standards, Federal Financial Institutions Examination Council.

and report forms for
depository institutions are
prescribed by the
A. FDIC.
B. Federal Reserve.
C. Federal Financial Institutions

Examination Council.
D. Office of Comptroller of
Currency.
FIN
Bank 320
A hasCh. 12 ROA than
a higher I only Study
Bank B. Both banks have similar

interest income to asset ratios
and noninterest income to
asset ratios. We know that
I. Bank A has a higher profit

margin than Bank B
II. Bank A has a higher AU ratio

than Bank B
III. Bank A must have a higher

PLL/OI ratio
A. I only
B. II only
C. I and II only
D. III only
E. I, II, and III
FIN
Cash 320
in theCh. 12 of
process D. checks that the bank is owed but has not yetStudy
collection is
collected.
A. a deposit at another
financial institution.
B. a Fed funds transaction.
C. checks the bank owes other

institutions that have not yet
been paid.
D. checks that the bank is owed

but has not yet collected.
E. equity capital.
Interest-bearing retail accounts MMDAs

with limited checking features
designed to compete with
money market mutual fund
investments are called
A. NOWs
B. retail CDs
C. MMDAs
D. special savings deposits
E. negotiable CDs
FIN 320 Ch.

Purchased 12include all but
funds Demand deposits Study
which one of the following?
A. Brokered deposits
B. Wholesale CDs
C. Fed funds purchased
D. Repurchase agreements
E. Demand deposits
Core deposits typically include Eurodollar deposits

all except which one of the
following?
A. Demand deposits
B. NOW accounts
C. MMDAs
D. Eurodollar deposits
E. Passbook savings accounts
FIN 320 the

The lower Ch.interest
12 expense higher, PM Study
ratio, the provision for loan loss

ratio, the noninterest expense
ratio, and the tax ratio the
_______________ the _______________.
A. lower; PM
B. higher; PM
C. lower; AU
D. higher; AU
E. lower; EM
The largest source of income interest income on loans and leases.

at a typical bank is
A. interest income on securities

held for sale.
B. interest income on securities

held for investment.
C. interest income on loans

and leases.
D. noninterest income.
E. dividends or stock.
FIN 320has
If a bank Ch. 12 purchased
more interest expense Study
funds than the average bank,

you would not be surprised to
see a higher than average
____________________ ratio.
A. provision for loan loss
B. tax
C. noninterest expense
D. interest expense
E. none of the options
The AU ratio measures the generate income from assets; control expenses
bank's ability to __________ and the
PM ratio measures the bank's
ability to __________________.
A. control expenses; generate

income from assets
B. generate income from

assets; control expenses
C. maximize interest revenue;

minimize interest expense
D. control leverage; minimize

physical plant
E. None of the options
FIN 320 Ch.

Investment 12 plus
securities net loans and leases Study
____________________ is equal to a
bank's earning assets.
A. net loans and leases
B. gross loans and leases
C. property, plant, and

equipment
D. securities held for trading
E. purchased accounts
FIN 320 and

Net loans Ch.leases
12 plus B. unearned income; the allowance for loan andStudy
________________ plus _________________ lease losses
equals gross loans and leases.
A. earned income; provision

for loan and lease losses
B. unearned income; the

allowance for loan and lease
losses
C. net charge-offs; provision

for loan and lease losses
D. provision for loan and lease

losses; allowance for loan and
lease losses
E. none of the options
The largest market available for E. Fed funds market

purchased funds is the
___________________.
A. wholesale CD market
B. Eurodollar deposit market
C. banker's acceptances
market
D. discount window purchases
E. Fed funds market
FIN 320 Ch. 12is a contra

A(n) __________________ allowance for loan and lease losses Study
asset account.
A. loan commitment
B. provision for loan and lease

losses
C. allowance for loan and

lease losses
D. net charge-off
All but which one of the Earnings on securities held for investment
following is an example of
noninterest income or
noninterest expense?
A. Income from service

charges on deposits
B. Income from trust services
C. Gains and losses from

trading account assets
D. Earnings on securities held

for investment
E. Salaries and benefits paid to

employees

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12/16/21, 2:47 PM FIN 320 Ch.

FIN 320 Ch. 12 Study

Social Sciences / Economics / Finance

FIN 320 Ch. 12

A wholesale bank is one that True

Composite rating 5 is the rating False

Banks have higher leverage True

Loans to consumers and to False

MMDAs are a type of savings True

FIN 320 are

businesses used to finance

The provision for loan loss FALSE

The allowance for loan and True

In ratio analysis, the profit True

Loans are the major item on a True

Both retail and wholesale CDs False

interest rates on NOW

Wholesale CDs obtained from True

At almost all banks noninterest False

Rate-sensitive funding sources FALSE

Core deposits are deposits that very stable funds sources.

A. at the bank solely for the

B. very stable funds sources.

C. typically for larger

D. very frequently turned over.

FIN 320 Ch. firm

obtain the necessary permits

I. Commercial letter of credit

II. Loan commitment

III. Credit line

IV. Repurchase agreement

the definition of the NIM?

A. (Net interest income - Net

B. Net interest income/Interest-

C. (Interest income - Interest

D. (Interest income - Interest

Uniform principles, standards, Federal Financial Institutions Examination Council.

C. Federal Financial Institutions

Bank B. Both banks have similar

I. Bank A has a higher profit

II. Bank A has a higher AU ratio

III. Bank A must have a higher

E. I, II, and III

B. a Fed funds transaction.

C. checks the bank owes other

D. checks that the bank is owed

Interest-bearing retail accounts MMDAs

D. special savings deposits

FIN 320 Ch.

which one of the following?

C. Fed funds purchased

Core deposits typically include Eurodollar deposits

E. Passbook savings accounts

FIN 320 the

ratio, the provision for loan loss

The largest source of income interest income on loans and leases.

A. interest income on securities

B. interest income on securities

C. interest income on loans

funds than the average bank,

A. provision for loan loss

E. none of the options