Question: 1. What are four major sources of funds for banks? What alternatives does a bank have if it needs temporary funds? What is the most common reason that banks issue bonds?
2. How does a money market deposit account differ from other bank sources of funds?
3. Define federal funds, federal funds market, and federal funds rate. Who sets the federal funds rate? Why is the federal funds market more active on Wednesdays?
4. Explain how the federal funds market facilitates bank operations.
5. Describe the process of borrowing at the Federal Reserve. What rate is charged, and who set it? Why do banks commonly borrow in the federal funds market rather than through the Federal Reserve?
6. Dow does the yield on a repurchase agreement differ from a loan in the federal funds market? Why?
7. Explain the dilemma faced by banks when determining the optimal amount of capital to hold. A bank's capital is less than 10% of its assets. How do you think this percentage would compare to that of manufacturing corporations? How would you explain this difference?
8. Explain how some mortgage operation by some commercial banks (along with other financial institutions) played a major role in instigating the credit crisis.
Information related to above question is enclosed below:
Attachment:- Commercial bank Operations.rar