罗斯商业银行管理习题Chap012

1、? 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Notauthorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,forwarded, distributed, or posted on a website, in whole or part.Chapter 12Managing and Prici

2、ng Deposit ServicesFill in the Blank QuestionsA(n)requires a bank to honor withdrawals immediately upon request.A(n)is an interest bearing checking account that gives the offeringbank the right to insist on prior notice before customer withdrawals can be honored.A(n)is a short-maturity deposit which

3、 pays a competitive interest rate. Only six preauthorized drafts per month are allowed but only three withdrawals can be made by writing checks.are designed to attract funds from customers who wish to set aside money in anticipation of future expenditures or financial emergencies.are a stable base o

4、f deposited funds that are not highly sensitive to movements in market interest rates and tend to remain with the depository institution.Some people feel that everyone is entitled access to a minimum level of financial service, no matter what their income level is. This issue is called the issue of.

5、is a way of pricing deposit services in which the rate, or return, orthe fees charged on the deposit accounts are based on the cost of offering the service plus a profit margin.When financial institutions tempt customers by paying postage both ways in bank-by-mail services or by offering free gifts

6、such as teddy bears, they are practicing.The is the added cost of bringing in new funds.pricing is where a financial institution sets up a schedule of fees in which a customer pays a low or no fee if the deposit balance stays above some minimum level and pays a higher fee if the balance declines bel

7、ow that minimum level.When a customer is charged a fixed cost per check, per period, or both, it is called pricing.When a customer is charged based on the number and kinds of services used, with the customers that use a number of services being charged less or having some fees waived, this is called

8、 pricing.is part of a new technology for processing checks where the bank takes a picture of the back and the front side of an original check and which can then be processed as if it were the original.A(n)is a thrift account which carries a fixed maturity date and generally carries a fixed interest

9、rate for that time period.A(n)is a conditional method of pricing deposit services in which the fees paid by the customer depend mainly on the account balance and volume of activity.The Act was passed in 1991 and specifies the information thatinstitutions must disclose to their customers about deposi

10、t accounts.Depositors must send their customers the amount of interest earnings received, along with the earned. It is the interest rate the customer has actually earned on the account.A(n)is a retirement plan that is designed for self-employed individuals.Research suggests that a depository institu

11、tions location is most important to-income consumers.Research suggests that-income consumers appear to be more influenced by the size of the financial institution.For decades, depository institutions offered only one type of savings plan. Onethat could be opened with as little as $5 and withdrawal p

12、rivileges were unlimited.CDs allow depositors to switch to a higher interest rate if market interest rates rise.CDs permit periodic upward adjustments in promised interest rates.CDs allow the depositor to withdraw some funds without a withdrawal penalty.The, which was created under Tax Relief Act of

13、 1997, allows individuals to make non-tax-deductible contributions to a retirement fund that can grow tax free and also pay no taxes on their investment earnings when withdrawn.Due to the fact that they may be perceived as more risky,banks generally offer higher deposit rates than traditional brick

14、and mortar banks.are accounts in domestic banking institutions where the U.S. Treasury keeps most of their operating funds.is a process where merchants and utility companies take the information from a check an individual has just written, and electronically debit the individuals account instead of

15、sending the check through the regular check clearing process.On October 28, 2004,became law, permitting depository institutions to electronically transfer check images instead of the checks themselves.True / False QuestionsThe volume of core deposits at U.S. banks has been growing in recent years re

16、lative to other categories of deposits.True FalseAccording to the textbook, the U.S. Treasury keeps most of its operating funds in TT&L deposits.True FalseDeposits held by banks with others are called correspondent deposits.True FalseThe implicit interest rate on checkable deposits equals the differ

17、ence between the cost of supplying deposit services to a customer and the amount of the service charge actually assessed to that customer.True FalseLegally imposed interest-rate ceilings on deposits were first set in place in the United States after passage of the Bank Holding Company Act.True False

18、Gradual phase-out of legal interest-rate ceilings on deposits offered by U.S. banks was firstauthorized by the Glass-Steagall Act.True FalseThe contention that there are certain banking services (such as small loans or savings andchecking accounts) that every citizen should have access to is usually

19、 called socialized banking.True FalseDomestic deposits generate legal reserves.True FalseExcess legal reserves are the sources out of which new bank loans are created.True FalseDemand deposits are among the most volatile and least predictable of a banks sources of fundswith the shortest potential ma

20、turity.True FalseIRA and Keogh deposits have great appeal for bankers principally because they can be soldbearing relatively low (often below-market) interest rates.True FalseIn general, the longer the maturity of a deposit, the lower the yield a financial institution must offer to its depositors be

21、cause of the greater interest-rate risk the bank faces with longer-term deposits.True FalseThe availability of a large block of core deposits decreases the duration of a banks liabilities.True FalseInterest-bearing checking accounts, on average, tend to generate lower net returns for banks than regu

22、lar (non-interest-bearing) checking accounts.True FalsePersonal checking accounts tend to be more profitable for banks than commercial checking accounts.True FalseNOW accounts can be held by businesses and individuals and are interest-bearing checking accounts.True FalseAn MMDA is a short-term depos

23、it where the bank can offer a competitive interest rate and which allows up to six preauthorized drafts per month.True FalseA Roth IRA allows an individual to accumulate investment earnings tax free and also pay no tax on their investment earnings when withdrawn provided the taxpayer follows the rul

24、es on this new account.True FalseCompetition tends to raise deposit interest costs.True FalseCompetition lowers the expected return to a bank from putting its deposits to work.True FalseA bank has full control over its deposit prices in the long run.True FalseNonprice competition for deposits has te

25、nded to distort the allocation of scarce resources in the banking sector.True FalseDeposits are usually priced separately from loans and other bank services.True FalseAccording to the text, no-fee savings accounts are on the decline.True FalseThe Truth in Savings Act requires a bank to disclose to i

26、ts deposit customers, the frequency with which interest is compounded on all interest-bearing accounts.True FalseUnder the Truth in Savings Act, customers must be informed of the impact of any early deposit withdrawals on the annual percentage yield they expect to receive from an interest-bearing de

27、posit.True FalseAccording to recent studies cited in this chapter, the number one factor that households consider in selecting a bank to hold their checking account is low fees and low minimum balance.True FalseAccording to recent studies cited in this chapter, the number one factor that households

28、consider in choosing a bank to hold their savings deposit is location.True FalseConditionally free deposits for customers mean that as long as the customers do not hold above a certain level of deposit, there are no monthly fees or per transaction charges.True FalseWhen a bank temporarily offers hig

29、her than average interest rates or lower than average customer fees in order to attract new business, they are practicing conditional pricing.True FalseWeb-centered banks with little or no physical facilities are known as virtual banks.True FalseThe total dollar value of checks paid in the United St

30、ates has grown modestly in recent years.True FalseThere are still a number of existing problems with online bill-paying services which has limited its growth.True FalseThe depository institutions which tend to have the highest deposit yields are credit unions.True FalseUrban markets are more respons

31、ive to deposit interest rates and fees than rural markets.True FalseResearch indicates that at least half of all households and small businesses hold their primary checking account at a depository institution situated within 3 miles of their location.True FalseMultiple Choice QuestionsDeposit accoun

32、ts whose principal function is to make payments for purchases of goods and services are called:drafts.second-party payments accounts.thrift deposits.transaction accounts.None of the options is correct.Interest payments on regular checking accounts were prohibited in the United States under terms of

33、the:G lass-Steagall Act.McFadden-Pepper Act.National Bank Act.Garn-St. Germain Depository Institutions Act.None of the options is correct.Money market deposit accounts (MMDAs), offering flexible interest rates, accessible for payments purposes, and designed to compete with share accounts offered by

34、money market mutual funds, were authorized by the:G lass-Steagall Act.Depository Institutions Deregulation and Monetary Control Act (DIDMCA).Bank Holding Company Act.Garn-St. Germain Depository Institutions Act.None of the options is correct.A stable and predictable base of deposited funds that is n

35、ot highly sensitive to movements inmarket interest rates and tend to remain with the bank is called:TT&L deposits.core deposits.consumer CDs.correspondent deposits.None of the options is correct.Negotiable Order of Withdrawal (NOW) accountsinterest-bearing savings accounts that can beused essentiall

36、y the same as checking accountswere authorized by:Glass-Steagall Act.Depository Institutions Deregulation and Monetary Control Act (DIDMCA).Bank Holding Company Act.Garn-St. Germain Depository Institutions Act.None of the options is correct.A deposit which offers flexible money market interest rates

37、 but is accessible for spending by writing a limited number of checks or executing preauthorized drafts is known as a(n):demand deposit.NOW account.MMDA.time deposit.None of the options is correct.The types of deposits that will be created by the banking system depend predominantly upon:the level of

38、 interest rates.the state of the economy.the monetary policies of the central bank.public preference.None of the options is correct.are often the most profitable deposit services for a bank.Time depositsTransaction depositsThrift depositsPassbook savings depositsCertificates of depositsSome people f

39、eel that all individuals are entitled to some minimum level of financial services, no matter what their income level is. This issue is often called:lifeline banking.preference banking.nondiscriminatory banking.lifeboat banking.None of the options is correct.The formula operating expense per unit of

40、deposit service plus estimated overhead expense plus planned profit from each deposit service unit soldreflects which of the deposit pricingmethod listed below?Marginal cost pricingCost plus pricingConditional pricingUpscale target pricingNone of the options is correctUsing deposit fee schedules tha

41、t vary deposit prices according to the number of transactions, average balance in the deposit account, and maturity of the deposits represents which of the deposit pricing method listed below?Marginal cost pricingCost plus pricingConditional pricingUpscale target pricingNone of the options is correc

42、t.The deposit pricing method that favors large-denomination deposits because services are free if the deposit account balance stays above some minimum figure is called:free pricing.conditionally free pricing.flat-rate pricing.upscale target pricing.marginal cost pricing.The Federal law that requires

43、 U.S. depository institutions to make greater disclosure of the fees, interest rates, and other terms attached to the deposits they sell to the public is called the:Consumer Credit Protection Act.Fair Pricing Act.Consumer Full Disclosure Act.Truth in Savings Act.None of the options is correct.Deposi

44、tory institutions selling deposits to the public in the United States must quote the rate of return pledged to the owner of the deposit, which reflects the customers average daily balance kept in the deposit. This quoted rate of return is known as:annual percentage rate (APR).annual percentage yield

45、 (APY).daily deposit yield (DDY).daily average return (DAR).None of the options is correct.According to recent studies cited in this book, in selecting a bank to hold their checking accounts, which of the following factors do household customers rank first?Safety.High deposit interest rates.Convenie

46、nt location.Availability of other services.Low fees and low minimum balance.According to recent studies cited in this chapter, in choosing a bank to hold their savingsdeposits, which of the following factors do household customers rank first?FamiliarityInterest rate paidTransactional convenienceLoca

47、tionFees chargedAccording to recent studies cited in this chapter, in choosing a bank to supply their deposits and other services, which of the following factors do businessfirmsrankfirst?Quality of financial advice givenFinancial health of lending institutionWhether loans are competitively pricedWh

48、ether cash management and operations services are providedQuality of bank officersA financial institution that charges its customers based on the number of services they use and grants lower deposit fees or waives some fees for a customer that purchases two or more services is practicing:marginal co

49、st pricing.conditional pricing.relationship pricing.upscale target pricing.None of the options is correct.From an analysis on its deposits, a bank determines that account processing and other operating expenses cost the bank $3.95 per month. It has also determined that non-operating expenses on its

50、deposits are $1.35 per month. The bank wants to have a profit margin which is 10 percent of monthly costs. What monthly fee should the bank charge on its deposit accounts?$5.30 per month$3.95 per month$5.83 per month$5.70 per monthNone of the options is correctFrom an analysis on its deposits, a ban

51、k determines that account processing and other operating expenses cost the bank $4.45 per month. The bank has also determined that non-operating expenses on its deposits are $1.15 per month. It has also decided that it wants a profit of $0.45 on its deposits. What monthly fee should the bank charge

52、on its deposit accounts?$6.05$5.60$5.15$4.45None of the options is correctA customer makes a savings deposit for 45 days. During that time he earns $5 in interest and maintains an average daily balance of $1,000. What is the annual percentage yield on this savings account?0.5%4.13%4.07%4.5%None of t

53、he options is correctA customer has a savings account for one year. During the year he earns $65.50 in interest. For 180 days he has $2,000 in the account and for another 180 days he has $1,000 in the account. What is the annual percentage yield on this savings account?6.55%3.28%4.42%8.73%None of th

54、e options is correctIf you deposit $1,000 into a certificate of deposit that quotes you a 5.5% APY, how much will you have at the end of 1 year?A. $1,050.00B. $1,055.00C. $1,550.00D. $1,005.50E. None of the options is correct.A bank quotes an APY of 8%. A small business that has an account with the

55、bank had $2,500 in their account for half the year and $5,000 in their account for the other half of the year. How much in total interest earnings did the business make during the year?$300$200$400$150None of the options is correctConditional deposit pricing may involve all of the following factors

56、except:the level of interest rates.the number of transactions passing through the account.the average balance in the account.the maturity of the account.All of the options are used.Deposits designed to attract customers who wish to set aside money in anticipation of future expenditures or financial

57、emergencies are called:drafts.second-party payment accounts.thrift deposits.transaction accounts.None of the options is correct.A savings account evidenced only by a computer entry for which the customer gets a monthly printout is called:passbook savings account.statement savings deposits.negotiable

58、 order of withdrawal.money market mutual fund.None of the options is correct.A traditional savings account with transactions and balances evidenced by the entries recorded in a booklet kept by the customer is called:passbook savings account.statement savings plan.negotiable order of withdrawal.money

59、 market mutual fund.None of the options is correct.An account at a bank that carries a fixed maturity date, with a fixed interest rate, and which often carries a penalty for early withdrawal of money is called a:demand deposit.transaction deposit.time deposit.money market mutual deposit.None of the

60、options is correct.A time deposit that has a denomination greater than $100,000 and is generally for wealthy individuals and corporations is known as a:negotiable CD.bump-up CD.step-up CD.liquid CD.None of the options is correct.A time deposit that is non-negotiable but allows a depositor to switch