Refer to the information below for questions Formosa International Bank (FIB) (mill$) $\begin{array}{ll} \text { Funds borrowed } & \$ 6,300 \\ \text { Maximum amount FIB can still borrow } & \$ 8,600 \\ \text { Cash-type assets } & \$ 4,700 \\ \text { Excess cash reserves } & \$ 100 \\ \text { Federal Reserve borrowings } & \$ 200 \end{array}$ -What are Formosa International Bank's total sources of future liquidity?

A) $16,520 B) $13,400 C) $14,200 D) $12,280 E) $15,760 A) $16,520 B) $13,400 C) $14,200 D) $12,280 E) $15,760

A) Hedge of a particular asset or liability B) Hedge on macroeconomic variables C) Hedge using options on particular liabilities D) Hedge without basis risk E) Hedge of an entire balance sheet A) Hedge of a particular asset or liability B) Hedge on macroeconomic variables C) Hedge using options on particular liabilities D) Hedge without basis risk E) Hedge of an entire balance sheet

Exam 20: Risk Management in Financial Institutions

Limitation to VaR include I. Basic VaR calculations assume returns on portfolios are normally distributed II) VaR is sensitive to the time period chosen III) VaR does not specify the maximum possible loss IV) VaR is not easy to understand

(Multiple Choice)

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Question 61

Why might a bank that has purchased a cap also wish to also sell a floor?

(Multiple Choice)

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Question 62

FICO credit scores typically range from with and higher generally considered to be a good score.

(Multiple Choice)

4.8/5

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Question 63

Insolvency occurs when an institution's duration gap becomes negative.

(True/False)

4.8/5

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Question 64

If a bank encounters a loan default the bank will typically

(Multiple Choice)

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Question 65

Banks must balance liquidity risk, interest rate risk, credit risk and currency risk while still generating sufficient profitability to satisfy its owners.

(True/False)

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Question 66

A certain loan category has a 2.1% default rate and defaulted loans have a -10% return. Loans that don't default earn whatever rate the bank charges. If the lending bank wishes to earn a 4.5% average return on this loan category, including defaulted loans, what rate must the bank charge each borrower?

(Multiple Choice)

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Question 67

Duration GAP is a conceptually superior method to assess the interest rate risk of a financial institution than $GAP.

(True/False)

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Question 68

If a bank specializes in mortgage lending it will tend to have a negative $ GAP and a positive duration GAP.

(True/False)

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Question 69

Refer to the information below for questions Formosa International Bank (FIB) (mill$) Funds borrowed \ 6,300 Maximum amount FIB can still borrow \ 8,600 Cash-type assets \ 4,700 Excess cash reserves \ 100 Federal Reserve borrowings \ 200 -What are Formosa International Bank's total sources of future liquidity?

(Multiple Choice)

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Question 70

A macro hedge is a

(Multiple Choice)

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Question 71

Basis risk is the risk that the prices or value of the underlying spot and the derivatives instrument used to hedge do not move predictably relative to one another.

(True/False)

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Question 72

A firm informs the bank they will immediately draw down the maximum amount on their credit line. This is an example of liquidity risk.

(True/False)

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Question 73

If the asset duration is less than the weighted duration of the liabilities, then falling interest rates will cause the market value of equity to rise.

(True/False)

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Question 74

Explain the dilemma between liquidity, solvency and profitability. How can liquidity risk can lead to insolvency risk?

(Essay)

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Question 75

Showing 61 - 75 of 75

Limitation to VaR include I. Basic VaR calculations assume returns on portfolios are normally distributed II) VaR is sensitive to the time period chosen III) VaR does not specify the maximum possible loss IV) VaR is not easy to understand

Why might a bank that has purchased a cap also wish to also sell a floor?

FICO credit scores typically range from with and higher generally considered to be a good score.

Insolvency occurs when an institution's duration gap becomes negative.

If a bank encounters a loan default the bank will typically

Banks must balance liquidity risk, interest rate risk, credit risk and currency risk while still generating sufficient profitability to satisfy its owners.

Duration GAP is a conceptually superior method to assess the interest rate risk of a financial institution than $GAP.

If a bank specializes in mortgage lending it will tend to have a negative $ GAP and a positive duration GAP.

A macro hedge is a

Basis risk is the risk that the prices or value of the underlying spot and the derivatives instrument used to hedge do not move predictably relative to one another.

A firm informs the bank they will immediately draw down the maximum amount on their credit line. This is an example of liquidity risk.

If the asset duration is less than the weighted duration of the liabilities, then falling interest rates will cause the market value of equity to rise.

Explain the dilemma between liquidity, solvency and profitability. How can liquidity risk can lead to insolvency risk?

An Overview of Financial Markets and Institutions

The Federal Reserve and Its Powers

The Fed and Interest Rates

The Level of Interest Rates

Bond Prices and Interest Rate Risk

The Structure of Interest Rates

Money Markets 1

Bond Markets

Mortgage Markets and Mortgagebacked Securities

Equity Markets

Derivatives Markets

International Markets

Commercial Bank Operations

International Banking

Regulation of Financial Institutions

Thrift Institutions and Finance Companies

Insurance Companies and Pension Funds

Investment Banking

Investment Companies

Filters

Exam 20: Risk Management in Financial Institutions

Limitation to VaR include I. Basic VaR calculations assume returns on portfolios are normally distributed II) VaR is sensitive to the time period chosen III) VaR does not specify the maximum possible loss IV) VaR is not easy to understand

Why might a bank that has purchased a cap also wish to also sell a floor?

FICO credit scores typically range from ______ with ______ and higher generally considered to be a good score.

Insolvency occurs when an institution's duration gap becomes negative.

If a bank encounters a loan default the bank will typically

Banks must balance liquidity risk, interest rate risk, credit risk and currency risk while still generating sufficient profitability to satisfy its owners.

Duration GAP is a conceptually superior method to assess the interest rate risk of a financial institution than $GAP.

If a bank specializes in mortgage lending it will tend to have a negative $ GAP and a positive duration GAP.

A macro hedge is a

Basis risk is the risk that the prices or value of the underlying spot and the derivatives instrument used to hedge do not move predictably relative to one another.

A firm informs the bank they will immediately draw down the maximum amount on their credit line. This is an example of liquidity risk.

If the asset duration is less than the weighted duration of the liabilities, then falling interest rates will cause the market value of equity to rise.

Explain the dilemma between liquidity, solvency and profitability. How can liquidity risk can lead to insolvency risk?

An Overview of Financial Markets and Institutions

The Federal Reserve and Its Powers

The Fed and Interest Rates

The Level of Interest Rates

Bond Prices and Interest Rate Risk

The Structure of Interest Rates

Money Markets 1

Bond Markets

Mortgage Markets and Mortgagebacked Securities

Equity Markets

Derivatives Markets

International Markets

Commercial Bank Operations

International Banking

Regulation of Financial Institutions

Thrift Institutions and Finance Companies

Insurance Companies and Pension Funds

Investment Banking

Investment Companies

Filters

FICO credit scores typically range from with and higher generally considered to be a good score.