Beware of those low fixed interest loan deals we hear on the radion all the time. From the Denver Post:

"It is all part of stopping the worst practices and making consumers more financially literate," Zavislan said. "We want to drive home the point that a 1 or 2 percent interest rate is just a teaser rate designed to get you in the door, and that there's really no such thing as a 30-year fixed-interest mortgage at that rate."

Why are a bank's liabilities said to be its sources of funds? Why are a bank's assets said to be its uses of funds?

Why would government regulators and taxpayers like banks to have high net worth?

Describe the types of risk that banks face.

How do banks try to reduce credit risk?

What are floating rate loans? How do they help to reduce the interest rate risk for banks?

What are the major types of off-balance sheet activities in which banks engage? Why have banks been involved in more of these activities recently and less in traditional banking?

Suppose that banks collectively have not managed their exposure to interest rate risk well and that market interest rates increase and become more volatile. What do you predict will happen to the value of the equity capital in the banking industry? To the number of bank failures?

Suppose that Ann, who has an account at First Bank, writes a check for $1000 to Bill, who has an account at Melon Bank. When the check clears, how have the balance sheets of First and Melon been affected?

If you were a banker who believed that interest rates were going to rise, what would you try to do with your bank's portfolio?

What are credit scores and how are they computed?

What is Gresham's Law?

Define: Bailment. Under what circumstances is fraud in the bailment industry more likely? Explain Jevons' contribution to understanding this industry.

Explain 100 percent warehousing and fractional reserve warehousing.

Why were bailment laws tightened in the grain industry and not in the banking industry in the 19th century? After all, both industries store homogeneous and fungible objects.

Why is fractional reserve banking less likely to be persist for the long run in an economy with a gold standard and competing currencies?

Explain the logic behind the Bretton Woods system. Which two policies discussed in class were especially important in causing the Bretton Woods system to fall apart? Why is Mundell an important economist in relation to the Bretton Woods system and its aftermath?