Question

QUESTION 12

1. Interest costs do not equal the effective cost of bank liabilities because:

   		reserve requirements increase the effective costs.
   		there be substantial processing costs.
   		service charges may offset a portion of non-interest expense.
   		all of the above.
   		1. and 3.

6 points   

QUESTION 13

1. Which financial ratio measures a firm's ability to pay current interest and lease payments with current earnings?

   		Fixed charge coverage ratio.
   		Return on equity.
   		Current ratio.
   		Inventory turnover.
   		Debt to total assets ratio.

Answer 1

Question 12:

All of the above
Transaction accounts are subject to legal reserve requirements and these reserve requirements increase the cost of the transaction accounts. Also, when the customers have large number of deposit transactions, then there are substantial processing costs. And certain fees are charged on some accounts to offset the non-interest expense and this reduces the cost of these funds to the bank.
Therefore, all of the above is the answer.

Question 13:

Current Ratio
Current ratio is a type of liquidity ratio that helps to measure a company's ability to pay its short term obligations as they become due and thus remain in the business in the short-run.