FIN 480 Exam 2 Review Questions and
Answers Graded A+
Money eliminates the need for: - Correct answer-**A. a search for a double
coincidence of wants.
B. government regulation.
C. specialization of labor.
D. financial Intermediaries.
In the last 30 years, the number of banks with branches has ____, while the number
of unit banks has _____. - Correct answer-A. Increased;increased
B. Decreased;decreased
**C. Increased;decreased
D. Decreased;increased
The majority of banks have a ______ - Correct answer-**A. State charter
B. Federal charter
C. Both a state and a federal charter
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,The U.S. has many banks because: - Correct answer-A. small banks are more
profitable than large banks.
**B. many states outlawed bank branching.
C. The Great Depression caused failure the large banks, leaving many small banks.
D. the Glass‐Steagall Act forced splitting of large banks.
An investment with a large spread between possible payoffs will generally have: -
Correct answer-A. low expected return.
**B. a high standard deviation.
C. a low value at risk.
D. both a low expected return and a low value at risk.
Considering a bank's balance sheet, which of the following statements is false? -
Correct answer-**A. Assets + Liabilities = Capital
B. Assets = Liabilities + Capital
C. Liabilities = Assets ‐ Capital
D. Capital = Assets ‐ Liabilities
A mortgage loan appears as a ____ on a bank's balance sheet and as a ____ on a
person's balance sheet. - Correct answer-A. Asset;equity
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, **B. Asset;liability
C. Liability;equity
D. Liability;asset
E. Equity;asset
F. Equity;liability
One measure of a bank's profitability is "net interest income". This is based on the
idea that - Correct answer-A. A bank pays higher interest rates to deposits than it
receives from loans
B. A bank receives higher interest rates on its assets relative to what it pays for its
liabilities
C. A Bank's Liabilities Earn Interest Income
Which of the following statements is not true? - Correct answer-A. The largest
source of funds for banks to lend comes from the owner's capital.
B. Transaction deposits make up less than 10 percent of banks sources of funds.
C. The largest sources of funds for banks are non‐transactions accounts.
D. Borrowings are a larger source of funds for banks than transaction deposits
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Answers Graded A+
Money eliminates the need for: - Correct answer-**A. a search for a double
coincidence of wants.
B. government regulation.
C. specialization of labor.
D. financial Intermediaries.
In the last 30 years, the number of banks with branches has ____, while the number
of unit banks has _____. - Correct answer-A. Increased;increased
B. Decreased;decreased
**C. Increased;decreased
D. Decreased;increased
The majority of banks have a ______ - Correct answer-**A. State charter
B. Federal charter
C. Both a state and a federal charter
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,The U.S. has many banks because: - Correct answer-A. small banks are more
profitable than large banks.
**B. many states outlawed bank branching.
C. The Great Depression caused failure the large banks, leaving many small banks.
D. the Glass‐Steagall Act forced splitting of large banks.
An investment with a large spread between possible payoffs will generally have: -
Correct answer-A. low expected return.
**B. a high standard deviation.
C. a low value at risk.
D. both a low expected return and a low value at risk.
Considering a bank's balance sheet, which of the following statements is false? -
Correct answer-**A. Assets + Liabilities = Capital
B. Assets = Liabilities + Capital
C. Liabilities = Assets ‐ Capital
D. Capital = Assets ‐ Liabilities
A mortgage loan appears as a ____ on a bank's balance sheet and as a ____ on a
person's balance sheet. - Correct answer-A. Asset;equity
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
, **B. Asset;liability
C. Liability;equity
D. Liability;asset
E. Equity;asset
F. Equity;liability
One measure of a bank's profitability is "net interest income". This is based on the
idea that - Correct answer-A. A bank pays higher interest rates to deposits than it
receives from loans
B. A bank receives higher interest rates on its assets relative to what it pays for its
liabilities
C. A Bank's Liabilities Earn Interest Income
Which of the following statements is not true? - Correct answer-A. The largest
source of funds for banks to lend comes from the owner's capital.
B. Transaction deposits make up less than 10 percent of banks sources of funds.
C. The largest sources of funds for banks are non‐transactions accounts.
D. Borrowings are a larger source of funds for banks than transaction deposits
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
