The US Banking System 3e by Center for Financial Training

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CHAPTER 01—THE BUSINESS OF BANKING
1. A bank is a not-for-profit organization.
a. True
b. False
ANSWER: False
POINTS: 1
LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 1.1.1 - LO: 1.1.1

2. All federally chartered banks must be corporations.
a. True
b. False
ANSWER: True
POINTS: 1
LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 1.1.1 - LO: 1.1.1

3. Commercial banks offer their services only to businesses.
a. True
b. False
ANSWER: False
POINTS: 1
LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 1.1.1 - LO: 1.1.1

4. Record keeping is an important part of securing your money in a bank.
a. True
b. False
ANSWER: True
POINTS: 1
LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 1.2.1 - LO: 1.2.1

5. Issuing credit cards is a form of bank lending.
a. True
b. False
ANSWER: True
POINTS: 1
LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 1.2.2 - LO: 1.2.2

6. It is illegal for banks to charge higher interest rates for loans than they pay depositors.
a. True
b. False
ANSWER: False
POINTS: 1
LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 1.3.1 - LO: 1.3.1

7. Generally speaking, banks offer customers fewer services today than they did 20 years ago.
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,Name Clas Dat
: s: e:

CHAPTER 01—THE BUSINESS OF BANKING
a. True
b. False
ANSWER: False
POINTS: 1
LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 1.1.2 - LO: 1.1.2

8. Interest on home-equity loans often is tax-deductible for consumers.
a. True
b. False
ANSWER: True
POINTS: 1
LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 1.3.2 - LO: 1.3.2

9. A credit union is a not-for-profit organization.
a. True
b. False
ANSWER: True
POINTS: 1
LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 1.4.1 - LO: 1.4.1

10. A loan company is not a financial intermediary because it does not receive deposits.
a. True
b. False
ANSWER: False
POINTS: 1
LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 1.4.2 - LO: 1.4.2

11. Return on equity is the ratio of net income to total assets.
a. True
b. False
ANSWER: False
POINTS: 1
LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 1.3.1 - LO: 1.3.1

12. Which of the following statements about banks is NOT true?
a. Banks distribute the medium of exchange.
b. All banks are organized as corporations.
c. Banks may be chartered by either federal or state governments.
d. Banks are essential to maintaining the economy.
ANSWER: b
POINTS: 1
LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 1.1.1 - LO: 1.1.1

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, Name Clas Dat
: s: e:

CHAPTER 01—THE BUSINESS OF BANKING
13. Banks that manage, regulate, and protect both the money supply and other banks are
a. retail banks.
b. central banks.
c. commercial banks.
d. credit unions.
ANSWER: b
POINTS: 1
LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 1.1.1 - LO: 1.1.1

14. One result of competition among banks is that
a. more services are available to consumers.
b. more banks exist now than a decade ago.
c. the trend toward mergers in the banking industry has slowed.
d. all of the above.
ANSWER: a
POINTS: 1
LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 1.1.2 - LO: 1.1.2

15. Banks move money between
a. other banks.
b. banks and individual customers.
c. governments.
d. all of the above.
ANSWER: d
POINTS: 1
LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 1.2.1 - LO: 1.2.1

16. In the United States, banks and ____________________ work together to form the banking system and to ensure the
money supply is adequate, appropriate, and trustworthy.
a. consumers
b. industry
c. savings and loans
d. the government
ANSWER: d
POINTS: 1
LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 1.2.2 - LO: 1.2.2

17. The difference between what a bank pays in interest and what it receives in interest is called
a. profit.
b. spread.
c. gross interest income.
d. loss.
ANSWER: b
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