Chapter 12 Review Flashcards
1
Q
What Services to Banks provide?
A
- Preserve Wealth
- Provide Services, and protection
- Bill-pay
2
Q
Banks are related to what?
A
The heart; they pump money through the financial system.
3
Q
Banks Loans and Deposits
A
- Loans - Assets
- Deposits are the Liabilities
4
Q
Business model of a bank:
A
- They borrow at a lower rate than they receive.
- Increase interest spread and leverage like crazy.
5
Q
Bank Risks:
A
- Liquidity Risk: Depositors demand their money.
- Credit Risk: The risk of default.
- Interest rate risk: The market interest rate may rise or fall.
6
Q
CONTINUE WITH CH. 12 Book notes!
A
–
7
Q
3 Cash Items
A
- Reserves: Regulations require it.
- Cash items in process of collection: Uncollected fund from checks.
- Balances of accounts at other banks.
8
Q
Securities:
A
*second largest asset.
9
Q
Loans are the primary asset of modern banks:
A
Business loans
Real estate loans
-Consumer loans, etc
10
Q
Liablities of banks
A
These of the source of the funds loaned out.
- Transaction accounts: short term, checking accounts,
- Non-transaction accounts: Savings and CD’s.
11
Q
ROA
A
NI/Total assets
12
Q
Net interest margin of a bank is very similar to
A
THe ROA
13
Q
Size of bank’s assets:
A
15.5 trillion
14
Q
Size of Bank Liabilities
A
13 trillion
15
Q
Size of bank loans:
A
8.5 trillion
