Part I:

Say whether these sentences are TURE (T) or FALSE (F): (10 marks)

() 1. Historically, banks have been recognized for the great range of financial services they offer

() 2. Money center banks are smaller locally focused commercial and saving banks

() 3. Virtual banks offer their financial services only on the internet

() 4. The primary purpose of the financial system is to encourage saving and to transfer those savings to individuals and institutions planning to invest and needing credit to do so

() 5. Insurance companies sell insurance policies, banks don't.

() 6. Commercial banking is the dominant supplier of credit and payments services to businesses and households

() 7. Banking continues to be increasingly concentrated in the very largest of all financial firms but not in the smallest banks

() 8. Banks are usually significantly impacted by changes in the health of the local economy and keeping up with new regulations

() 9. A larger bank is able to raise huge amounts of financial capital at relatively low cost

() 10. Automated bookkeeping has increased the time managers spend in routine operations

() 11. There are so many different types of financial institutions today that the distinctions between these different types of organizations often get very confusing

() 12. Financial statements can be viewed as a "road map". Tell us where a financial firm has been in the past, where it is now, and possibly where it is headed in the future

() 13. Assets equal liabilities minus equities

() 14. Legal reserve is determined by management but influenced by taxes and government regulation

() 15.A balance sheet indicates the amount of revenue received and expenses incurred over a specific period of time

() 16. Performance must be directed toward specific objectives

() 17. The minimum acceptable rate of return, r, is sometimes referred to as an institution's cost of capital

() 18. The higher the standard deviation or variance of the above measures, the lower the overall risk

() 19. Depository institutions devote a small portion of their asset portfolios to investments in securities

() 20. The risk that the security issuer may default on the principal or interest owed is called security risk