4. Interest-bearing transaction deposits at a financial institution are generally:

1. Checking accounts held by consumers.
2. Checking accounts held by business firms.
3. Money-market savings deposits.
4. Both (a) and (b).

5. Transaction deposits are more costly because:

1. They are longer-term deposits.
2. They pay high interest rate to the customer.
3. Banks have to incur FDIC insurance cost on transaction deposits but not on non-transaction deposits.
4. They involve high number of transactions that banks need to process.

6. One of the tasks capital performs is regulator of growth. This means:

1. Geographic and portfolio diversification.
2. Growth and development of new services.
3. The regulator could limit a financial institution from expanding its loans and deposits too fast, or from acquiring other institutions if the financial institution is deemed to be undercapitalized.
4. All of the above.

7. Which of the following is included in both Basel II framework and in Basel III framework?

1. Liquidity risk.
2. Interest rate risk.
3. Operational risk.
4. Exchange risk.