Chapter 13 answers

Fractional reserve banking refers to a banking system in which bank loans are less than bank reserves. bank deposits are less than bank reserves. bank reserves are less than total deposits. bank reserves are only a fraction of required reserves.

The prime interest rate Multiple Choice is lower than the federal funds rate because it is the rate charged to a bank's most creditworthy customers. is influenced by Fed policies that change the money supply. usually is at the same as the federal funds rate. is a benchmark interest rate set directly by the Fed.

If the Fed buys loans from banks, what is the impact on the Loanable Funds Market? A) Decreases the supply of loanable funds and lowers the interest rate. B) Increases the supply of loanable funds and lowers the interest rate. C) Decreases the supply of loanable funds and raises the interest rate. D) Increases the supply of loanable funds and raises the interest rate.

1) Which of the following statements about the money markets are true? A) Most money market securities do not pay interest. Instead, the investor pays less for the security than it will be worth when it matures. B) Pension funds invest a portion of their assets in the money market to have sufficient liquidity to meet their obligations. C) Unlike most participants in the money market, the U.S. Treasury Department is always a demander of money market funds and never a supplier. D) All of the above are true. E) Only A and B of the above are true.

27.Which of the following statements are true?Statement I. Money markets are used to facilitate the transfer of short-term funds from individuals, corporations, or governments with excess funds to those with deficient funds. Even investors who focus on long-term securities tend to hold some money market securities because this enables them to maintain liquidity. Statement II. Financial institutions manage their liquidity by participating in money markets. They may issue money market securities when they experience cash shortages and need to boost liquidity. They can also sell holdings of money market securities to obtain cash.Statement III. The value of a money market security represents the future value of the present cash flows generated by that security. Since money market securities represent debt, their expected cash flows are typically known.Statement IV. The pricing of money market securities changes in response to a shift in the required rate of return by investors. The…

All else being equal, if a central bank sells government bonds from the market it would: a. decrease the money supply. b. decrease interest rates. c. mean the supply of loanable funds would move to the right. d. most likely decrease savings in the economy.

Why do federally guaranteed loans usually have the least risk for banks, List some popular guaranteed loan programs.

Suppose the required reserve retio of solve this question

How does the creation of a Treasury STRIP help the government raise cash? Seleccione una: a. It does not help b. Increases the amount received since there are two securities sold c. It increases the demand for the two investments d. It increases the liquidity of the investment

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The Federal Reserve has the power to fix the min rate of interest that commercial banks may pay on savings account.  True  False

. Consider a failing bank. How much is a deposit of$290,000 worth to the depositor. if the FDIC uses thepayoff method? The purchase-and-assumption method?Which method is more costly to taxpayers?

Which of the following is NOT an advantage of depositing funds into a bank account (compared to directly purchasing corporate bonds and shares): Options    1. Higher transactions costs   2. Monitoring performed by the bank on behalf of the depositor   3. Better liquidity if funds are needed quickly   4. Efficient payment services   5.Reduced price risk if funds are needed immediately

41) Sweep accounts A) have made reserve requirements nonbinding for many banks. B) sweep funds out of deposit accounts into long-term securities. C) enable banks to avoid paying interest to corporate customers. D) reduce banks' assets. 42) Since 1974, commercial banks importance as a source of funds for nonfinancial borrowers A) has shrunk dramatically, from around 40 percent of total credit advanced to around 25 percent by 2011. B) has shrunk dramatically, from around 70 percent of total credit advanced to below 50 percent by 2011. C) has expanded dramatically, from around 50 percent of total credit advanced to above 70 percent by 2011. D) has expanded dramatically, from around 30 percent of total credit advanced to above 50 percent by 2011. 43) Thrift institutions importance as a source of funds for borrowers A) has shrunk from around 40 percent of total credit advanced in the late 1970s to below 30 percent by 2011. B) has shrunk from over 20…