365 $
© 2014 Pearson Canada Inc.$- What are the main items in a bank's asset side of the balance sheet? discuss them briefly.
Answer: The students must answer that the main items in a bank's asset side of the balance sheet
are:
- Cash reserves: vault cash, settlement balances
- Deposits at other banks: interbank deposits
- Cash items in process of collection: items in transit or bank float
- Securities: government of Canada, provincial and municipal, and other securities.
- Loans: commercial, industrial, real estate.
- Fixed and other assets: physical capital, etc.
Diff: 2 Type: SA Page Ref: 296 - 297
Skill: Recall
Objective List: 13.1 Outline a bank's sources and uses of funds
13.2 Basic Banking
Banks earn profits by selling ____ with attractive combinations of liquidity, risk, and
return, and using the proceeds to buy ____ with a different set of characteristics.
A) loans; deposits
B) securities; deposits
C) liabilities; assets
D) assets; liabilities
Answer: C
Diff: 1 Type: MC Page Ref: 297
Skill: Recall
Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans
In general, banks make profits by selling ____ liabilities and buying ____ assets.
A) long-term; shorter-term
B) short-term; longer-term
C) illiquid; liquid
D) risky; risk-free
Answer: B
Diff: 1 Type: MC Page Ref: 297
Skill: Recall
Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans
Asset transformation can be described as ____.
A) borrowing long and lending short
B) borrowing short and lending long
C) borrowing and lending only for the short term
D) borrowing and lending for the long term
Answer: B
Diff: 1 Type: MC Page Ref: 297
Skill: Recall
Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans