Question 1

The money market approach to liquidity management involves:

Accepted Answer

A)  selling money market instruments to increase liquidity 
B)  buying money market instruments to increase liquidity 
C)  matching asset maturities with specific future liquidity needs 
D)  using money market instruments to cover reserve requirements 
A)  selling money market instruments to increase liquidity 
B)  buying money market instruments to increase liquidity 
C)  matching asset maturities with specific future liquidity needs 
D)  using money market instruments to cover reserve requirements

Question 2

Liquid assets not only serve as an alternative source of funds for banks but they are used as a reserve to meet unexpected cash needs.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is a source of funds?

Accepted Answer

A)  increases in loans and decreases in deposits 
B)  decreases in loans and increases in deposits 
C)  increases in loans and increases in deposits 
D)  decreases in loans and decreases in deposits 
A)  increases in loans and decreases in deposits 
B)  decreases in loans and increases in deposits 
C)  increases in loans and increases in deposits 
D)  decreases in loans and decreases in deposits

Question 4

If a bank has a deficiency of reserves, the Federal Reserve would allow it to use:

Accepted Answer

A)  fed funds 
B)  the discount window 
C)  bankers' acceptance 
D)  none of the above 
A)  fed funds 
B)  the discount window 
C)  bankers' acceptance 
D)  none of the above

Question 5

All of the following are common ratio measures of bank liquidity EXCEPT:

Accepted Answer

A)  loans/deposits 
B)  loans/nondeposit liabilities 
C)  unencumbered liquid assets/nondeposit liabilities 
D)  fixed assets/loans 
A)  loans/deposits 
B)  loans/nondeposit liabilities 
C)  unencumbered liquid assets/nondeposit liabilities 
D)  fixed assets/loans

Question 6

Under lagged reserve requirement accounting all of the following are true EXCEPT:

Accepted Answer

A)  the transactions computation period comes before the maintenance period 
B)  there is a 17-day lag between the end of the transactions computational period and the beginning of the maintenance period 
C)  the vault cash computational period is 14 days long 
D)  LRR rules apply only to nontransactions accounts 
A)  the transactions computation period comes before the maintenance period 
B)  there is a 17-day lag between the end of the transactions computational period and the beginning of the maintenance period 
C)  the vault cash computational period is 14 days long 
D)  LRR rules apply only to nontransactions accounts

Question 7

Secondary reserves and the money market approach are closely related to one another.

Accepted Answer

A) True 
 B)False

Question 8

In optimal liquidity management decisions, there is a trade off between __________ and __________.

Accepted Answer

A)  long-term liquidity; short-term liquidity 
B)  primary reserves; secondary reserves 
C)  the cost of maintaining liquidity; the cost of insufficient liquidity 
D)  price risk; interest rate risk 
A)  long-term liquidity; short-term liquidity 
B)  primary reserves; secondary reserves 
C)  the cost of maintaining liquidity; the cost of insufficient liquidity 
D)  price risk; interest rate risk

Question 9

Asset management includes:

Accepted Answer

A)  using money market instruments to cover liquidity 
B)  using cash reserves to cover liquidity 
C)  borrowing fed funds to cover liquidity 
D)  a and b 
E)  a, b, and c 
A)  using money market instruments to cover liquidity 
B)  using cash reserves to cover liquidity 
C)  borrowing fed funds to cover liquidity 
D)  a and b 
E)  a, b, and c

Question 10

Which of the following is NOT a criterion for evaluating bank liquidity used by regulators?

Accepted Answer

A)  availability of assets readily converted into cash 
B)  the diversity of the bank's money market assets 
C)  the bank's formal and informal commitments for future lending or investments 
D)  structure and volatility of deposits 
E)  reliance on interest sensitive funds 
A)  availability of assets readily converted into cash 
B)  the diversity of the bank's money market assets 
C)  the bank's formal and informal commitments for future lending or investments 
D)  structure and volatility of deposits 
E)  reliance on interest sensitive funds

Question 11

Regulation D of DIDMCA 1980 did all of the following EXCEPT:

Accepted Answer

A)  required all depository institutions to carry legal reserves 
B)  changed Fed accounting procedures for reserves on transactions balances from contemporaneous to lagged 
C)  eliminated incentives for member banks to leave the system 
D)  facilitated monetary control 
A)  required all depository institutions to carry legal reserves 
B)  changed Fed accounting procedures for reserves on transactions balances from contemporaneous to lagged 
C)  eliminated incentives for member banks to leave the system 
D)  facilitated monetary control

Question 12

Federal funds and the discount window are the most likely external sources of funds that bank use to meet reserve requirements.

Accepted Answer

A) True 
 B)False

Question 13

Optimum liquidity balances costs of too much or too little liquidity.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following money market instruments arises from international trade?

Accepted Answer

A)  agency securities 
B)  bankers' acceptances 
C)  repurchase agreements 
D)  fed funds 
A)  agency securities 
B)  bankers' acceptances 
C)  repurchase agreements 
D)  fed funds

Question 15

A key advantage of liability management is that assets can be shifted from money market assets to loans and longer-term securities.

Accepted Answer

A) True 
 B)False

Question 16

Today, there is no reserve requirement on nonpersonal time deposits.

Accepted Answer

A) True 
 B)False

Question 17

The sources and uses of funds method is used to measure asset liquidity.

Accepted Answer

A) True 
 B)False

Question 18

Liability management increases a bank's _________ risk and _________ risk.

Accepted Answer

A)  interest rate; price 
B)  liquidity; financial 
C)  interest rate; financial 
D)  price; interest rate 
A)  interest rate; price 
B)  liquidity; financial 
C)  interest rate; financial 
D)  price; interest rate

Question 19

Primary reserves are comprised of cash and near money financial instruments.

Accepted Answer

A) True 
 B)False

Question 20

Managing the money position of a bank relates to:

Accepted Answer

A)  maximizing cash holdings 
B)  minimizing cash holdings 
C)  minimizing reserves held with the Fed 
D)  maximizing return on investment 
A)  maximizing cash holdings 
B)  minimizing cash holdings 
C)  minimizing reserves held with the Fed 
D)  maximizing return on investment

The money market approach to liquidity management involves:

Liquid assets not only serve as an alternative source of funds for banks but they are used as a reserve to meet unexpected cash needs.

Which of the following is a source of funds?

If a bank has a deficiency of reserves, the Federal Reserve would allow it to use:

All of the following are common ratio measures of bank liquidity EXCEPT:

Under lagged reserve requirement accounting all of the following are true EXCEPT:

Secondary reserves and the money market approach are closely related to one another.

In optimal liquidity management decisions, there is a trade off between and .

Asset management includes:

Which of the following is NOT a criterion for evaluating bank liquidity used by regulators?

Regulation D of DIDMCA 1980 did all of the following EXCEPT:

Federal funds and the discount window are the most likely external sources of funds that bank use to meet reserve requirements.

Optimum liquidity balances costs of too much or too little liquidity.

Which of the following money market instruments arises from international trade?

A key advantage of liability management is that assets can be shifted from money market assets to loans and longer-term securities.

Today, there is no reserve requirement on nonpersonal time deposits.

The sources and uses of funds method is used to measure asset liquidity.

Liability management increases a bank's _ risk and _ risk.

Primary reserves are comprised of cash and near money financial instruments.

Managing the money position of a bank relates to:

Functions and Forms of Banking

The Bank Regulatory Environment

Evaluating Bank Performance

Bank Valuation

An Overview of Assetliability Management Alm

Techniques of Assetliability Management: Futures, Options, and Swaps

Investment Management

Credit Evaluation Process

Commercial and Industrial Lending

Real Estate and Consumer Lending

Capital Management

Managing Liabilities

Off-Balance Sheet Activities

Securities, Investment Insurance Products

Other Financial Services

Electronic Banking

Global Financial Services

Filters

Exam 11: Liquidity Management

The money market approach to liquidity management involves:

Liquid assets not only serve as an alternative source of funds for banks but they are used as a reserve to meet unexpected cash needs.

Which of the following is a source of funds?

If a bank has a deficiency of reserves, the Federal Reserve would allow it to use:

All of the following are common ratio measures of bank liquidity EXCEPT:

Under lagged reserve requirement accounting all of the following are true EXCEPT:

Secondary reserves and the money market approach are closely related to one another.

In optimal liquidity management decisions, there is a trade off between __________ and __________.

Asset management includes:

Which of the following is NOT a criterion for evaluating bank liquidity used by regulators?

Regulation D of DIDMCA 1980 did all of the following EXCEPT:

Federal funds and the discount window are the most likely external sources of funds that bank use to meet reserve requirements.

Optimum liquidity balances costs of too much or too little liquidity.

Which of the following money market instruments arises from international trade?

A key advantage of liability management is that assets can be shifted from money market assets to loans and longer-term securities.

Today, there is no reserve requirement on nonpersonal time deposits.

The sources and uses of funds method is used to measure asset liquidity.

Liability management increases a bank's _________ risk and _________ risk.

Primary reserves are comprised of cash and near money financial instruments.

Managing the money position of a bank relates to:

Functions and Forms of Banking

The Bank Regulatory Environment

Evaluating Bank Performance

Bank Valuation

An Overview of Assetliability Management Alm

Techniques of Assetliability Management: Futures, Options, and Swaps

Investment Management

Credit Evaluation Process

Commercial and Industrial Lending

Real Estate and Consumer Lending

Capital Management

Managing Liabilities

Off-Balance Sheet Activities

Securities, Investment Insurance Products

Other Financial Services

Electronic Banking

Global Financial Services

Filters

In optimal liquidity management decisions, there is a trade off between and .

Liability management increases a bank's _ risk and _ risk.