Financial Markets And Institutions 7th Edition By Anthony Saunders – Test Bank

Chapter 11 Commercial Banks: Industry Overview

1) Business loans have dropped in importance since 1987 as measured by the proportion of these loans on the bank balance sheet.

Answer: TRUE
Difficulty: 2 Medium
Topic: Balance Sheets and Recent Trends
Bloom’s: Remember
AACSB: Reflective Thinking
Learning Goal: 11-02 Identify the main assets held by commercial banks.
Accessibility: Keyboard Navigation

2) Loans comprise the single largest asset category for a bank.

Answer: TRUE
Difficulty: 1 Easy
Topic: Balance Sheets and Recent Trends
Bloom’s: Remember
AACSB: Reflective Thinking
Learning Goal: 11-02 Identify the main assets held by commercial banks.
Accessibility: Keyboard Navigation

3) Banks have an average total debt ratio of about 90 percent.

Answer: TRUE
Difficulty: 2 Medium
Topic: Balance Sheets and Recent Trends
Bloom’s: Remember
AACSB: Reflective Thinking
Learning Goal: 11-03 Identify the main liabilities held by commercial banks.
Accessibility: Keyboard Navigation

4) On average, bank liabilities tend to have shorter maturities and greater liquidity than bank assets.

Answer: TRUE
Difficulty: 1 Easy
Topic: Balance Sheets and Recent Trends
Bloom’s: Remember
AACSB: Reflective Thinking
Learning Goal: 11-03 Identify the main liabilities held by commercial banks.
Accessibility: Keyboard Navigation

5) Nontransaction deposits at banks include NOW accounts and demand deposits.

Answer: FALSE
Difficulty: 1 Easy
Topic: Balance Sheets and Recent Trends
Bloom’s: Remember
AACSB: Reflective Thinking
Learning Goal: 11-03 Identify the main liabilities held by commercial banks.
Accessibility: Keyboard Navigation

6) The majority of banks are nationally chartered and insured by the FDIC.

Answer: FALSE
Difficulty: 1 Easy
Topic: Regulators
Bloom’s: Remember
AACSB: Reflective Thinking
Learning Goal: 11-07 Know the main regulators of commercial banks.
Accessibility: Keyboard Navigation

7) Since 1980, the number of banks in the United States has been increasing dramatically due to deregulation of the industry.

Answer: FALSE
Difficulty: 2 Medium
Topic: Size, Structure, and Composition of the Industry
Bloom’s: Remember
AACSB: Reflective Thinking
Learning Goal: 11-05 Discuss which factors have motivated the significant decrease in the number of commercial banks.
Accessibility: Keyboard Navigation

8) Small banks control about 70 percent of banking industry assets.

Answer: FALSE
Difficulty: 1 Easy
Topic: Size, Structure, and Composition of the Industry
Bloom’s: Remember
AACSB: Reflective Thinking
Learning Goal: 11-05 Discuss which factors have motivated the significant decrease in the number of commercial banks.
Accessibility: Keyboard Navigation

9) Off-balance-sheet activities consist of issuing financial instruments such as various types of guarantees and engaging in derivative trading to generate additional revenue.

Answer: TRUE
Difficulty: 2 Medium
Topic: Balance Sheets and Recent Trends
Bloom’s: Remember
AACSB: Reflective Thinking
Learning Goal: 11-04 Understand the types of off-balance-sheet activities that commercial banks undertake.
Accessibility: Keyboard Navigation

10) The financial crisis of 2008, demonstrated that activities such as trading in financial futures and interest-rate swaps have low risk.

Answer: FALSE
Difficulty: 2 Medium
Topic: Balance Sheets and Recent Trends
Bloom’s: Remember
AACSB: Reflective Thinking
Learning Goal: 11-04 Understand the types of off-balance-sheet activities that commercial banks undertake.
Accessibility: Keyboard Navigation