For firms in most countries,what is the dominant sourceof external financing??

a.direct finance

b.indirect finance, especially loans

c.equity markets

d.commercial paper markets

e.bond markets

The potential for loans to default is known as

a.credit risk.

b.interest rate risk.

c.loan risk.

d.portfolio risk.

e.liquidity risk.

1. Adverse selection occurs before the transaction.
2. True
3. False

The costs oforiginating,organizing,arranging,andimplementing an exchange are known as

a.financial costs.

b.moral hazard.

c.adverse selstion.

d.transactions costs.

e.market costs.

Which of the following is a liability on a commercial bank balancesheet?

a.mortgage loans

b.discount loans

c.cash items in process of collection

d.Treasury securities

e.vault cash

1. The supply of reserves consists of non-borrowed reserves plus borrowed reserves.
2. True
3. False

he state of Missouri containstwo Federal Reserve Banks.

True

False

The Banking Act of 1863

a.created the Office of the Comptroller of the Currency.

b.placed a tax on state bank notes.

c.encouraged the development of checks.

d.created the dual banking system of the United States.

e.all of the above.

If a bank has more rate-sensitive liabilities than rate-sensitive assets,

a.an increase in liabilities will increase bank profit.

b.an increase in interest rates will reduce bank profit.

c.an increase in assetswill reduce bank profit.

d.an increase in interest rates will increase bank profit.

e.then the bank should shut down.

Suppose that you deposit $1000 in cashinto your checking account at FirstBank.What is the effect on Firstbank'sbalance sheet?

a.Liabilities decrease by $1000with no change in assets.

b.There is no change in assets or liabilities.

c.Both assets and liabilities increase by $1000.

d.Assets increase by $1000with no change in liabilities.

e.Both assets and liabilities decline by $1000.