1. Which of the following is NOT a major use of funds (asset category) for a commercial bank?

a. Commercial loans b. Real estate loans c. Bond investments d. Stock investments

2. One criticism of deposit insurance for banks is it may encourage bank managers to take excessive risks when making loans or investments. This is a restatement of the ____ problem.

a. Lender of last resort b. too big to fail c. moral hazard d. branching

3. The American Bank is one of the three largest banks in the United States. In the event that The American Bank began to fail many bank examinations, which resolution would most likely be used?

a. purchase and assumption b. payoff and liquidate c. dual banking

4. When regulators examine loan loss ratios, loan underwriting standards, and diversification in the investment portfolio, they are focusing on which of the CAMELS?

a. Assets b. Sensitivity c. Management d. Earnings

5. Which of the following is the ultimate goal of a commercial bank?

a. long-term growth c. bank safety b. deposit growth d. long-term profit maximization

6. Sometimes small banks deposit their money in larger commercial banks and use services provided by larger commercial banks. This relationship is called:

a. bank holding company c. correspondent banking b. agency relationship d. branch banking

7. The interest rate commercial banks charge their most credit-worthy customer borrowers for short-term loans is called the:

a. Fed funds rate b. Prime rate c. Discount rate d. Call rate

8. Banks invest in treasuries for all the following reasons EXCEPT:

a. they are marketable c. they provide capital b. they are liquid d. they provide income

9. Which of the following types of consumer bank accounts does NOT pay interest?

a. demand deposits b. NOW accounts c. time deposits d. Money market accounts

10. Which of the following is NOT an advantage of using a credit-scoring model?

a. Credit scoring models are inexpensive. c. Credit scoring models allow professional judgement. b. Credit scoring models are quick. d. Credit scoring models use only objective, quantitative data.