Which of the Following Statements Describes How Banks Have Historically

question 143

Multiple Choice

Which of the following statements describes how banks have historically used the discount window?

• A) They use it sparingly, because using it often signals that a bank is in financial trouble.
• B) They use it often, because it provides banks with instant access to needed funds.
• C) They use it often, because its low interest rate can serve as a source of profit for banks.
• D) They use it only during times of economic boom, when there is a high demand for loans.

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Definitions:

Stock Dividend

Instead of cash, a company distributes additional shares to its shareholders as a form of payment.

Total Stockholders' Equity

The total net value owned by the shareholders of a company, calculated as the difference between total assets and total liabilities.

Common Stock Dividends Distributable

A liability recorded on a company's balance sheet for dividends declared on common stock but not yet paid to shareholders.

Paid-in Capital

The amount of money a company has received from shareholders in exchange for shares of stock.