Banking Practice Exam

In the context of banking, assets refer to resources owned by a bank that are capable of generating economic value. The main categories of bank assets include loans, investment securities, and other assets like cash, equipment, and real estate.

Loans are a primary asset for banks, as they involve funds lent to customers, generating interest income over time. Investment securities comprise financial instruments that banks purchase to earn returns, such as stocks, bonds, and other investment vehicles. Other assets can include a range of items, such as fixed assets and physical holdings that the bank may utilize in its operations.

On the other hand, demand deposits represent liabilities for a bank. They are the funds that customers have deposited and can withdraw at any time, meaning the bank owes this money to its customers and must keep it readily available. Thus, demand deposits do not classify as assets; instead, they are obligations that the bank must fulfill. This distinction highlights why the correct choice identifies demand deposits as the outlier among the categories listed.