. What are some ways banks can state theircharges, and how should the cost of bankdebt be analyzed? In the early 1970s, Congressdebated the need for new legislation, and itended up passing a “Truth in Lending” law. Onepart of the law was the requirement that banksdisclose their APR. How is the APR calculated?Do you think the Truth in Lending law was reallynecessary?

. What are some ways banks can state theircharges, and how should the cost of bankdebt be analyzed? In the early 1970s, Congressdebated the need for new legislation, and itended up passing a “Truth in Lending” law. Onepart of the law was the requirement that banksdisclose their APR. How is the APR calculated?Do you think the Truth in Lending law was reallynecessary?

Business/Professional Ethics Directors/Executives/Acct

8th Edition

ISBN:9781337485913

Author:BROOKS

Publisher:BROOKS

Chapter2: Ethics & Governance Scandals

Section: Chapter Questions

Problem 6.2EC

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Fifty years ago, banks didn’t have to reveal the rates they charged on credit cards.Then Congress passed the Truth in Lending Act that required banks to publish theirAPRs. Is the APR really the most truthful rate, or would the EFF% be more truthful?Explain.
Which of the following statements is true about banks?(Choose an answer from the list below; only one is correct.) Reference: Chapter 11 and/or slides for class discussion. Group of answer choices They hold ALL of their customers deposits in the form of cash or government bonds. They are NOT allowed to set the interest rates at which they lend, interest rates on products like mortgages are set by the Federal Reserve or by another of their regulators. They act as an intermediary for borrowers and savers by taking in DEPOSITS and using them to make LOANS. They are owned and operated by the government and are not permitted to make a profit.
What are the advantages and disadvantages of direct lending for the bank? How are banks reducing the effect of the disadvantages?
Why are the banks reluctant to lend, and what should be done to increase bank lending?
When any central bank wanted to increase the money supply and loosen credit conditions, what would it do in the private market for government bonds? Explain how this is supposed to affect the economy.
Based on the functions of the banking system, give reasons why governments bail out banks during an economic crisis?
What are some of the ways that banks can borrow short-term funds when they need "liquidity"?(Select all that apply; three of the answers below are correct.) Reference: Chapters 11 & 12 They can borrow directly from the Securities & Exchange Commission through the "regulatory" market. They can borrow from the Department of Treasury through the "Treasury" window. They can borrow another bank's reserves through the "fed funds" market. The can engage in a "sale & repurchase agreement" (or "repo") by selling some of their securities to another financial insitution and promising to buy them back the next day. They can borrow directly from the Federal Reserve through the "discount window".
Which of the following is a reason that banks may favor fee compensation over balance compensation? Balance compensation is not as visible as fees for budgeting purposes. The strategy involves attracting deposits to fund their loans. Earning credits used to determine the value of collected balances are taxable. Deposit balances increase liabilities on the balance sheet.
Give typing answer with explanation and conclusion What types of restrictions are imposed on banks? Why do we regulate banks?
What are the pros and cons of U.S. savings bonds? What are some of the problems that individuals might face if they use one of the “problematic” financial institutions? What are some of the consumer protections available? What can individuals do to protect themselves? What are some of the advantages and disadvantages of choosing a federally-insured account? What are some considerations in choosing a financial institution?
Which of the following would increase a bank’s Net Interest Margin, assuming all else stays the same? Choose Two an increase in the interest rate on its loans companies paying off some of their loans and the bank using the funds to purchase Treasury bonds customers switching a portion of their time deposits to demand deposits the bank issues additional equity and keeps the funds in cash an increase in the federal funds rate assuming the bank borrows more in the federal funds market than it lends
What are the benefits of government setting and managing bank fees and rates to depositors?