The objective of bank management is to a. refuse to make risky loans and make loans only to the safest borrowers. b. strike the appropriate balance between the attraction of bank profits and the need for bank safety. c. maximize stockholders’ profits by making risky investments and giving loans to borrowers who will pay the highest interest rates. d. invest in the U.S. government securities and make loans only to established businesses.

The objective of bank management is to a. refuse to make risky loans and make loans only to the safest borrowers. b. strike the appropriate balance between the attraction of bank profits and the need for bank safety. c. maximize stockholders’ profits by making risky investments and giving loans to borrowers who will pay the highest interest rates. d. invest in the U.S. government securities and make loans only to established businesses.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter25: Money, Banking, And The Federal Reserve System

Section: Chapter Questions

Problem 4P

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Similar questions

A bank has deposits of 400. It holds reserves of 50. It has purchased government bonds worth 70. It has made loans of 500. Set up a T-account balance sheet for the bank, with assets and liabilities, and calculate the banks net worth.
You are been asked by your younger sister to explain what banking is, write brief description of the activities of a bank explaining how they generate income.
Banking began as a mostly private (non-government) industry and, over time, the government's role became primarily one of regulation (e.g., setting reserve requirements) and providing support for private banks (e.g., central banks lending banks money to pay deposits). Is this balance of responsibilities good? Should the government be less involved in banking, or should the government expand its role in banking by taking deposits from and making loans directly to individuals and businesses (like most banks do today).
The most important developments that have reduced banks' cost advantages in the past twenty years include A)the growth of the junk bond market. B)the competition from money market mutual funds. C)the growth of securitization. D)all of the above. What is the answer and why?
"Banks make a profit by paying depositors a high rate to attract funds and making loans at a low rate to encourage borrowing." Is the previous statement correct or not?
What is the primary function of an investment bank? A) Providing loans to individuals B) Facilitating the buying and selling of securities C) Offering retail banking services D) Regulating financial markets
Which of the following is true about banks? Select one: a. The interest rate banks charge when they lend is the same they pay for the deposits they receive. b. Banks are financial institutions through which savers can directly provide funds to borrowers. c. Typically, banks receive few but big deposits, which they then use to make many small loans. d. Through the checking accounts they facilitate, banks provide a medium of exchange.
Why do bank runs occur a. Asymmetric Information b. Moral Hazard c. Financial dis-imediation d. Capital Requirements
QUESTION NINE The best statement that explains the differences between Islamic and conventional bank is A ) in the modern banking system, it has become one of the service-oriented functions of all banks to pay out zakat as their social responsibility. B ) Islamic bank promotes risk-sharing between the provider of capital and the user of funds. In contrast, the fund provider of the conventional bank is assured of a predetermined rate of interest. C ) both conventional and Islamic banks aim to maximize profit but are subject to different restrictions. D ) the functions and operating modes of Islamic banks are based on Shari’ah and manmade principles.
Suppose a bank has $15 million in savings deposits, $7 million in checking deposits, $27 million in total deposits, and $9 million in debts. The bank is also holding $12 million in reserves, $4 million in short term government bonds, $16 million in securities, $2 million in loans. What is the bank’s net worth? Is the bank healthy or not?

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	a.	refuse to make risky loans and make loans only to the safest borrowers.
	b.	strike the appropriate balance between the attraction of bank profits and the need for bank safety.
	c.	maximize stockholders’ profits by making risky investments and giving loans to borrowers who will pay the highest interest rates.
	d.	invest in the U.S. government securities and make loans only to established businesses.