Question 1

Most banks hold cash reserves well in excess of legal reserve requirements.

Accepted Answer

A) True 
 B)False

Question 2

Collateralized commercial paper is issued by:

Accepted Answer

A)  banks 
B)  Federal agencies 
C)  special purpose corporations 
D)  private corporations 
A)  banks 
B)  Federal agencies 
C)  special purpose corporations 
D)  private corporations

Question 3

Asset liquidity and liability management are essentially the same or identical concepts.

Accepted Answer

A) True 
 B)False

Question 4

Managing the money position refers to minimizing holdings of money market instruments.

Accepted Answer

A) True 
 B)False

Question 5

Liquidity practice in normal everyday operations is known as:

Accepted Answer

A)  crisis liquidity management 
B)  liability liquidity management 
C)  operational liquidity management 
D)  routine liquidity management 
E)  asset liquidity management 
A)  crisis liquidity management 
B)  liability liquidity management 
C)  operational liquidity management 
D)  routine liquidity management 
E)  asset liquidity management

Question 6

The two approaches to meeting potential liquidity requirements are:

Accepted Answer

A)  short-term and long-term liquidity 
B)  corporate stock and bond portfolios 
C)  asset liquidity and liability management 
D)  CD's and deposits 
A)  short-term and long-term liquidity 
B)  corporate stock and bond portfolios 
C)  asset liquidity and liability management 
D)  CD's and deposits

Question 7

The government policy of preventing failures of very large banks is known as:

Accepted Answer

A)  lender of last resort 
B)  too-big-to-fail 
C)  run contagion 
D)  none of the above 
A)  lender of last resort 
B)  too-big-to-fail 
C)  run contagion 
D)  none of the above

Question 8

The first step in any analysis of bank liquidity is the estimation of liquidity needs.

Accepted Answer

A) True 
 B)False

Question 9

Use of liability management ________ bank size and so requires appropriate ________ in capital reserves.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; decreases 
D)  decreases; increases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; decreases 
D)  decreases; increases

Question 10

Funds management involves:

Accepted Answer

A)  combining long-term bonds and short-term money market assets 
B)  combining asset liquidity and liability managment 
C)  comparing total liquidity needs with total liquidity sources 
D)  b and c 
E)  a, b, and c 
A)  combining long-term bonds and short-term money market assets 
B)  combining asset liquidity and liability managment 
C)  comparing total liquidity needs with total liquidity sources 
D)  b and c 
E)  a, b, and c

Question 11

Regulators are concerned with the least cost liquidity strategy for a bank.

Accepted Answer

A) True 
 B)False

Question 12

A problem situation that threatens a bank's solvency is related most closely wit operational liquidity.

Accepted Answer

A) True 
 B)False

Question 13

If a bank has a deficiency of funds, the most likely source of funds to make up this deficiency is:

Accepted Answer

A)  cash reserves 
B)  fed funds market 
C)  money market securities 
D)  increased deposits 
A)  cash reserves 
B)  fed funds market 
C)  money market securities 
D)  increased deposits

Question 14

The major strength of the structure-of-deposits method is:

Accepted Answer

A)  it centers management attention on one of the most likely causes of liquidity pressures 
B)  it ignores other liquidity demands 
C)  it categorizes loan demands according to stability 
D)  it assigns a probability of withdrawal to each nondeposit source of funds 
A)  it centers management attention on one of the most likely causes of liquidity pressures 
B)  it ignores other liquidity demands 
C)  it categorizes loan demands according to stability 
D)  it assigns a probability of withdrawal to each nondeposit source of funds

Question 15

The money market approach to liquidity management results in all of the following EXCEPT:

Accepted Answer

A)  avoids securities transactions costs 
B)  helps maintain capital reserves 
C)  avoids price risk 
D)  provides interest revenues 
A)  avoids securities transactions costs 
B)  helps maintain capital reserves 
C)  avoids price risk 
D)  provides interest revenues

Question 16

If a bank securitizes some loans and sells the securities without recourse to investors, the ban is liable to these investors for any losses that they may experience on the securities.

Accepted Answer

A) True 
 B)False

Question 17

The quantity of deposit and nondeposit funds in a bank depends on all of the following EXCEPT:

Accepted Answer

A)  the Fed's monetary policy actions 
B)  the bank's financial strength 
C)  economic conditions 
D)  none of the above; they all affect the quantity of deposit and nondeposit funds 
A)  the Fed's monetary policy actions 
B)  the bank's financial strength 
C)  economic conditions 
D)  none of the above; they all affect the quantity of deposit and nondeposit funds

Question 18

Medium-term notes have the advantage(s) of:

Accepted Answer

A)  no underwriter needed 
B)  lower price risk during issuance 
C)  terms tailored to demands of investors 
D)  all of the above 
A)  no underwriter needed 
B)  lower price risk during issuance 
C)  terms tailored to demands of investors 
D)  all of the above

Most banks hold cash reserves well in excess of legal reserve requirements.

Collateralized commercial paper is issued by:

Asset liquidity and liability management are essentially the same or identical concepts.

Managing the money position refers to minimizing holdings of money market instruments.

Liquidity practice in normal everyday operations is known as:

The two approaches to meeting potential liquidity requirements are:

The government policy of preventing failures of very large banks is known as:

The first step in any analysis of bank liquidity is the estimation of liquidity needs.

Use of liability management bank size and so requires appropriate in capital reserves.

Funds management involves:

Regulators are concerned with the least cost liquidity strategy for a bank.

A problem situation that threatens a bank's solvency is related most closely wit operational liquidity.

If a bank has a deficiency of funds, the most likely source of funds to make up this deficiency is:

The major strength of the structure-of-deposits method is:

The money market approach to liquidity management results in all of the following EXCEPT:

If a bank securitizes some loans and sells the securities without recourse to investors, the ban is liable to these investors for any losses that they may experience on the securities.

The quantity of deposit and nondeposit funds in a bank depends on all of the following EXCEPT:

Medium-term notes have the advantage(s) of:

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

Most banks hold cash reserves well in excess of legal reserve requirements.

Collateralized commercial paper is issued by:

Asset liquidity and liability management are essentially the same or identical concepts.

Managing the money position refers to minimizing holdings of money market instruments.

Liquidity practice in normal everyday operations is known as:

The two approaches to meeting potential liquidity requirements are:

The government policy of preventing failures of very large banks is known as:

The first step in any analysis of bank liquidity is the estimation of liquidity needs.

Use of liability management ________ bank size and so requires appropriate ________ in capital reserves.

Funds management involves:

Regulators are concerned with the least cost liquidity strategy for a bank.

A problem situation that threatens a bank's solvency is related most closely wit operational liquidity.

If a bank has a deficiency of funds, the most likely source of funds to make up this deficiency is:

The major strength of the structure-of-deposits method is:

The money market approach to liquidity management results in all of the following EXCEPT:

If a bank securitizes some loans and sells the securities without recourse to investors, the ban is liable to these investors for any losses that they may experience on the securities.

The quantity of deposit and nondeposit funds in a bank depends on all of the following EXCEPT:

Medium-term notes have the advantage(s) of:

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

Use of liability management bank size and so requires appropriate in capital reserves.