Chapter 5The Financial Statements of Banks and Their Principal CompetitorsFill in the Blank Questions1.Fed funds purchased is an example of _ along with Eurodollar borrowings. Answer: nondeposit borrowings 2.The short term securities of the bank, including T-Bills and commercial paper, are often called _ because they are the second line of defense to meet demands for cash. Answer: secondary reserves 3._ is a noncash expense on the banks income statement which allows the bank to account for future bad loans. Answer: Provision for loan losses 4._ is the difference between interest income and interest expenses for a financial institution. Answer: Net interest income 5._ are the primary long term liabilities of the bank. These liabilities are paid only after deposits have been paid in the event of bankruptcy. Answer: Subordinated notes and debentures 6.A(n)_ is where the financial institution agrees to guarantee repayment of a customers loan received from a third party. Answer: standby credit agreement 7.A(n)_ is a short term collateralized loan. The collateral that is used generally consists of T-Bills. Answer: repurchase agreement 8.A(n)_ is a deposit account which pays an interest rate competitive with money market mutual funds and which generally has limited check writing ability. Answer: money market deposit account 9._ is the sum of all outstanding IOUs owed to the bank in the form of consumer, real estate, commercial and agriculture loans as well as other types of credit extensions. Answer: gross loans 10.A financial institution often records the value of its assets and liabilities at _ which is the original or historical cost of the asset. Answer: book value 11.The principal types of_ include fee income, income from fiduciary activities and services charges on deposits. Answer: noninterest income 12.The_ shows the amount of revenues received and expenses incurred over a specific time period. Answer: Report of Income (income statement) 13.The_ lists the assets, liabilities and equity capital held by the bank on a given date. Answer: Report of Condition (balance sheet) 14._ is labeled Accounting for Derivative Instruments and Hedging Activities. Answer: FASB 13315._ labeled “Accounting for Derivative Instruments and Hedging Activities” and its recent amendments, FASB 138, are designed to make derivatives more publicly visible on corporate financial statements. Answer: FASB 133 16.Under _ banks must account for the expected loss of interest income on nonperforming loans when calculating their loan-loss provision. Answer: FASB 114 17.Temporarily buying and selling securities by a securities firm in a thinly traded market so as to influence the price is known as _. Answer: painting the tape 18.The activity of manipulating the financial statements to artificially enhance the banks financial strength is known as _. Answer: window dressing or creative accounting 19. is direct and indirect investment in real estate. These are properties obtained for compensations for nonperforming loans.Answer: Other Real Estate Owned (OREO)20. consists of interest income received on loans from customers that has not yet been earned by the bank under accrual accounting methods.Answer: Unearned discount income21. can be held by individuals and nonprofit institutions, bear interest and permit drafts from being written against the account to pay third parties.Answer: Now accounts22. In the worldwide banking system, represent transferable time deposits in a variety of currencies and are often the principal source of short term borrows by banks.Answer: Eurocurrency Borrowings23. One part of arises from fees charged for ATM and POS transactions.Answer: Other Noninterest Income24. Fees that arise from a financial firms trust activities, fees for managing a corporations interest and dividend payments and fees for managing corporate or individual retirement plans are all included in the category of fees arising from .Answer: fiduciary activities25. Checking account