1. A bank can usually offer a saver a higher return for the same risk because:

A. The bank can pool the resources of larger savers and purchase lower denominated assets

B. The bank can purchase assets at a higher cost than any saver

C. Economies of scale can be applied by the bank in its purchase of assets.

D. None of the above

2. A bank does all of the follow when dealing with moral hazard, except:

A. Not make any loans

B. Require collateral

C. Require down payments

D. Restrictive covenants

3. What part of the balance sheet is effected when there are unexpected deposit withdrawals so they borrow funds from another bank?

A. the Liabilities side

B. The asset side

C. Amount of Securities on balance sheet