5-4

Question 1

Banks create money when they make new loans.

Answer 1

True

Question 2

Deposits are created only when the Federal Reserve prints currency.

Answer 2

False

Question 3

Liquidity risk arises when banks cannot meet withdrawals without selling assets.

Answer 3

True

Question 4

Interest-rate risk occurs when short-term rates fall below long-term rates.

Answer 4

False

Question 5

Net Interest Margin (NIM) measures the spread between lending and funding costs.

Answer 5

True

Question 6

Capital ratio equals equity divided by total assets.

Answer 6

True

Question 7

FDIC insurance guarantees all deposits without limit.

Answer 7

False

Question 8

A bank’s balance sheet lists loans as liabilities.

Answer 8

False

Question 9

Loans are assets for banks because they generate income.

Answer 9

True

Question 10

Liquidity transformation is when banks fund long-term loans with short-term deposits.

Answer 10

True

Question 11

The Federal Reserve Act established the Fed as lender of last resort.

Answer 11

True

Question 12

Glass–Steagall separated commercial and investment banking.

Answer 12

True

Question 13

Dodd–Frank reduced stress testing for large banks.

Answer 13

False

Question 14

CET1 Ratio measures core equity capital over risk-weighted assets.

Answer 14

True

Question 15

The leverage ratio adjusts for risk weights.

Answer 15

False

Question 16

Liquidity Coverage Ratio (LCR) ensures enough high-quality liquid assets for 30 days.

Answer 16

True

Question 17

The Net Stable Funding Ratio (NSFR) focuses on short-term liquidity only.

Answer 17

False

Question 18

The FDIC insures credit union deposits.

Answer 18

False

Question 19

Stress tests assess bank performance under severe economic scenarios.

Answer 19

True

Question 20

Tier 1 Capital includes retained earnings and common stock.

Answer 20

True

Question 21

The leverage ratio is lower for safer banks.

Answer 21

False

Question 22

Dodd–Frank was passed after the 2008 financial crisis.

Answer 22

True

Question 23

Banks must meet both risk-based and leverage capital requirements.

Answer 23

True

Question 24

Liquidity ratios are unrelated to solvency risk.

Answer 24

False

Question 25

The Fed’s stress test scenarios are public.

Answer 25

True

Question 26

Basel III introduced CET1 requirements.

Answer 26

True

Question 27

Capital ratios are identical across all banks.

Answer 27

False

Question 28

Off-balance sheet exposures affect leverage calculations.

Answer 28

True

Question 29

Regulatory capital includes goodwill.

Answer 29

False

Question 30

Well-capitalized banks face fewer supervisory restrictions.

Answer 30

True

Question 31

Fractional reserve banking means banks keep all deposits on reserve.

Answer 31

False

Question 32

Loans create deposits within the banking system.

Answer 32

True

Question 33

The required reserve ratio limits deposit creation.

Answer 33

True

Question 34

Excess reserves increase the money multiplier.

Answer 34

False

Question 35

Central bank reserves settle interbank payments.

Answer 35

True

Question 36

If everyone withdraws at once, banks could face liquidity issues.

Answer 36

True

Question 37

Money creation stops when loans are repaid.

Answer 37

True

Question 38

Only the Federal Reserve can create money.

Answer 38

False

Question 39

Reserve requirements are a brake on credit expansion.

Answer 39

True

Question 40

Banks lend out all their deposits without any reserves.

Answer 40

False

Question 41

‘Too Big To Fail’ means large banks can never fail.

Answer 41

False

Question 42

Stablecoins are always fully backed by reserves.

Answer 42

False

Question 43

Starting a new bank requires regulatory approval and capital.

Answer 43

True

Question 44

Bank failures can be handled through bridge banks.

Answer 44

True

Question 45

Stablecoins held on exchanges are FDIC insured.

Answer 45

False

Question 46

Crypto custody risk arises if keys are lost or hacked.

Answer 46

True

Question 47

Too Big To Fail reforms aim to reduce systemic risk.

Answer 47

True

Question 48

FDIC receivership can protect depositors during a failure.

Answer 48

True

Question 49

Bank runs today can spread faster due to digital banking.

Answer 49

True

Question 50

Stablecoins operate within federal banking regulation.

Answer 50

False

Question 51

Credit unions are owned by their members.

Answer 51

True

Question 52

Credit unions are for-profit institutions.

Answer 52

False

Question 53

NCUA insures credit union deposits.

Answer 53

True

Question 54

Credit unions often offer higher loan rates than banks.

Answer 54

False

Question 55

Members can vote on governance in credit unions.

Answer 55

True

Question 56

Credit unions are limited to members with a common bond.

Answer 56

True

Question 57

FDIC covers all credit union accounts.

Answer 57

False

Question 58

VyStar is an example of a large regional credit union.

Answer 58

True

Question 59

Credit unions have the same profit motive as banks.

Answer 59

False

Question 60

Credit unions reinvest earnings into member benefits.

Answer 60

True