162. Which of the following wholesale services offered by FIs to businesses allows the FI to combine the e-mail
capabilities of the Internet with the FIs ability to process payments electronically through the interbank payment
networks?
163. Which of the following partially explains why cash management services have not attracted customers in
Europe to the degree that they have in the US?
164. Which of the following explains why ATM networks have grown relatively slowly in countries such as
Sweden and Singapore?
165. Which of the following implies reduced unit costs as size or volume of assets increases?
166. Which of the following implies reduced unit costs as the range of products offered increases inputs in
producing multiple products?
167. Large-scale investment projects that lead to excess capacity and integration problems that create cost
overruns and control problems are examples of
168. Which of the following implies that small FIs are more cost efficient than large FIs, and that in a freely
competitive environment for financial services, small FIs may outperform their larger counterparts?
169. Which of the following occurs if the costs of joint production of FI services are higher than they would be
if they were produced independently?
170. According to studies, which of the following may better explain cost differences and operating cost
efficiencies among FIs?
171. Which of the following best describes economies of scope?
172. Which of the following best describes X-inefficiencies?
173. Which of the following best describe economies of scale?
174. Which of the following are the two basic approaches to analyzing the cost functions of FIs?
175. Which of the following observations concerning the production approach is true?
176. Which of the following observations concerning the intermediation approach is true?
177. Which of the following statements is NOT true?
178. As of August 2009, which of the following represented the highest percent of the dollar value of noncash
transactions in the United States?
179. As of August 2009, which of the following accounts for the highest volume of noncash transactions in the
United States?
180. As of August 2009, which of the following represented the highest percent of the dollar value of noncash
transactions worldwide?
181. As of August 2009, which of the following accounts for the highest volume of noncash transactions
worldwide?
182. Which of the following observations concerning e-money is NOT true?
183. Which of the following observations is NOT true?
184. Settlement risk is important because
185. Daylight overdrafts occur when
186. Daylight overdraft
187. Suppose that the doubling of a bank’s deposit funding allows the bank to triple its loan output. What can
you conclude about the bank’s production technology?
188. Why has empirical evidence on economies of scale and scope been so contradictory?
189. Which of the following is consistent with economies of scope? The subscript “b” refers to a banking firm,
“s” for a securities firm, “AC” is average costs and “TC” is total costs.
190. Which is the most important banking area in which technology has had an impact?
191. Which of the following is NOT a wholesale banking service?
192. Which of the following is NOT a retail banking service?
193. Choose among the following services provided by modern FIs to answer questions 90 to 103.
1. Allows efficient management of multiple
currency and security portfolios for trading and
Assisting small business
2. A centralized collection service where the
payments are received on-line for corporate
3. Providing for the transmission of invoices,
purchase orders, and shipping notices
4. Automating the information flow associated
with the procurement and distribution of goods
Facilitating
business-to-business
5. Allows customers in a network to access FI
Electronic data
6. The transmission of payments and payment
Treasury management
7. A feature that records which checks have been
Electronic initiation of
8. Coordinating the need for funds early in the
day with a wire transfer to allow disbursement
9. Helping small firms set up electronic
infrastructure for payment capabilities and
10. Moving funds from accounts in several FIs
11. A centralized collection service for corporate
12. Combining the e-mail capability of the
Internet and the interbank payment networks to
assist in the presentation and collection of
13. Using encryption technology to assist in the
electronic transaction of business between
14. Encoding, endorsing, microfilming, and
Controlled disbursement
Saunders – Chapter 16 #90
194. What are average costs for each FI?
195. What can you conclude about the cost structure of the market consisting of the two FIs?
196. Assume a third FI (company C) operates in the same market with two FIs, and it has $800 million in assets
and total costs of $420 million. What can you conclude about the cost structure of the FIs in this market?
197. Should the bank invest in this project if the discount rate is 12 percent?
198. Should the bank invest in this project if the discount rate is 18 percent?
199. What is the IRR for this investment?
200. Should the bank undertake the project given the above information?
201. On further analysis, it is estimated that the project has a finite life of 5 years, i.e. further investment will be
required to generate the same savings. Should they undertake the project if they assume a five-year horizon for
evaluating the project?
202. What must be the minimum annual cost savings in order to accept this project? Assume a five-year
horizon.
203. The maximum cost savings that can be generated with this new equipment has been estimated to be
$264,237. In order to accept this project, what is the minimum number of years the projected savings must be
realized before the project breaks even?
204. The above figures indicate that
205. Bank B plans to acquire Bank A and in the process cut costs by $100,000. What is the combined bank’s
average costs?
206. By how much should operating costs of the combined entity (Bank A + Bank B) be reduced in order to
stay competitive in the local market, ceteris paribus?