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________________ Time allowed: 40 min I. Choose the best answer 1. Which one of the following is not the agency function of commercial Banks? A. Transfer of funds B. Purchase and sale of shares and securities C. Act as trustee and executor D. Safe custody of valuables 2. Which one is a false statement about credit creation? A. It is one of the primary functions of commercial banks. B. By using credit creation system the bank increase the money supply of the economy. C. Secondary deposits does not use for credit creation system. D. None 3. One of the following is not innovative functions of commercial Banks? A. Merchant banking B. underwriting C. Travelers check D. Factoring E. None 4. When the community is highly banking minded? A. The bank has to keep higher cash reserve ratio B. The bank has to keep lower cash reserve ratio C. The bank has to determine the cash reserve arbitrarily D. B and C 5. One of the following is not the factors causing decrease in supply? A. Hoarding by traders 1

B. Shortage of supply of any factor of production C. Hoarding by consumers D. Increase in public expenditure E. B and D 6. Deposits that are accepted by the bank in one lump sum for a fixed periods. A. Demand deposits B. Time deposits C. Recurring deposits D. Fixed deposits 7. All are the role of commercial Banks for economic development except A. Capital formation B. Provision of long term loans C. Effective implementation of monetary policy D. None 8. Which one is true about primary deposits? A. It is initial deposit B. It brings cash to the banking system C. It is also called secondary deposit D. Here the banker changes the currency money in to deposit 9. Bank gives a specified sum of money to a person or a firm against some collateral security. A. Cash credit B. Discount of bills C. Ordinary loans D. Overdraft 10. Saves the customers from the risk of carrying cash during their foreign travel. A. Credit cards B. Travelers check C. Letter of credit D. None 11. Overdraft facility is given by a banker to a person who have? A. Saving deposit 2

B. Current deposit C. Fixed deposit D. Time deposit 12. What is the rational (reason) for commercial banks to accept deposits of their customers? A. To pay interest rate for the depositor B. To protect the money from theft C. To create credit D. To keep cash reserve with in the central bank

II. Matching

A 13. Sectoral priorities 14. Factoring 15. merchant banking 16. agency function 17. investment funds 18. general utility service

B A. capital formation B. demand draft, purchase & sale of shares C. small scale industries(SSIS) D. mutual funds E. subscription of shares, debentures and bonds F. deposit multiplier G. efficient banking system H. issue management I. travelers check

III. Work out

19. Assume that a new deposit of birr 20,000 has been made with bank Z and the amount of total deposit created was 100,000. Calculate: A. deposit multiplier B. cash reserve ratio