Question 1

An investment fund that sells a fixed number of shares in the fund to outside investors is called:

Accepted Answer

A)  open-end fund. 
B)  closed-end fund. 
C)  fixed fund. 
D)  fixed number fund. 
A)  open-end fund. 
B)  closed-end fund. 
C)  fixed fund. 
D)  fixed number fund.

Question 2

Trend liquidity planning calculates an FI's liquidity need as the simple difference between the FI's liquid assets and its volatile sources of funds.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements is true?

Accepted Answer

A)  Under the BIS scenario analysis, an FI needs to assess its liquidity position in comparison to other FIs in the market based on different scenarios. 
B)  Under the BIS scenario analysis, an FI needs to estimate the size of cash flows for each type of asset and liability based on past experience. 
C)  Under the BIS scenario analysis, an FI needs to assign a timing of cash flows for each type of asset and liability by assessing the probability of behaviour of those cash flows under the scenario being examined. 
D)  None of the listed options are correct. 
A)  Under the BIS scenario analysis, an FI needs to assess its liquidity position in comparison to other FIs in the market based on different scenarios. 
B)  Under the BIS scenario analysis, an FI needs to estimate the size of cash flows for each type of asset and liability based on past experience. 
C)  Under the BIS scenario analysis, an FI needs to assign a timing of cash flows for each type of asset and liability by assessing the probability of behaviour of those cash flows under the scenario being examined. 
D)  None of the listed options are correct.

Question 4

Which of the following is not a component of liquidity planning?

Accepted Answer

A)  A summary of the size of potential net deposit drains over various time horizons. 
B)  Detailed list of funds providers who have seasonal patterns of funds usage. 
C)  A calculation of the value of assets at fire-sale prices relative to the fair market value of those assets. 
D)  A detailed itemisation of managerial responsibilities. 
A)  A summary of the size of potential net deposit drains over various time horizons. 
B)  Detailed list of funds providers who have seasonal patterns of funds usage. 
C)  A calculation of the value of assets at fire-sale prices relative to the fair market value of those assets. 
D)  A detailed itemisation of managerial responsibilities.

Question 5

Contingent liquidity needs refers to the liquidity needs necessary to:

Accepted Answer

A)  fund contingent assets. 
B)  fund assets. 
C)  meet an unforeseen event. 
D)  meet a foreseen event. 
A)  fund contingent assets. 
B)  fund assets. 
C)  meet an unforeseen event. 
D)  meet a foreseen event.

Question 6

Net deposit drains refer to the amount by which cash withdrawals:

Accepted Answer

A)  are less than additions-this is a cash outflow. 
B)  are less than additions-this is a cash inflow. 
C)  exceed additions-this is a cash outflow. 
D)  exceed additions-this is a cash inflow. 
A)  are less than additions-this is a cash outflow. 
B)  are less than additions-this is a cash inflow. 
C)  exceed additions-this is a cash outflow. 
D)  exceed additions-this is a cash inflow.

Question 7

Which of the following statements is true?

Accepted Answer

A)  A positive financing gap means that the FI must fund it by using its cash and liquid assets or by raising funds in the money market. 
B)  A negative financing gap means that the FI must fund it by using its cash and liquid assets or by raising funds in the money market. 
C)  A positive financing gap means that the FI has excess liquidity. 
D)  A negative financing gap means that the FI is in need of liquidity. 
A)  A positive financing gap means that the FI must fund it by using its cash and liquid assets or by raising funds in the money market. 
B)  A negative financing gap means that the FI must fund it by using its cash and liquid assets or by raising funds in the money market. 
C)  A positive financing gap means that the FI has excess liquidity. 
D)  A negative financing gap means that the FI is in need of liquidity.

Question 8

Fire-sale price refers to the price received for:

Accepted Answer

A)  an asset that has to be sold at half price. 
B)  a liability that has to be sold at half price. 
C)  an asset that has to be sold immediately. 
D)  a liability that has to be sold immediately. 
A)  an asset that has to be sold at half price. 
B)  a liability that has to be sold at half price. 
C)  an asset that has to be sold immediately. 
D)  a liability that has to be sold immediately.

Question 9

The Bank for International Settlements requires FIs to measure their liquidity positions under normal market conditions only.

Accepted Answer

A) True 
 B)False

Question 10

APRA requires every FI to hold sufficient liquid assets to meet a name crisis situation.

Accepted Answer

A) True 
 B)False

Question 11

The Reserve Bank of Australia (RBA) took a number of temporary actions during the global financial crisis to provide liquidity and avert financial system disturbance. Which of the following were not actions supplied by the RBA?

Accepted Answer

A)  Extension of collateral eligible for open market operations. 
B)  Longer term repos offered daily that provided funding for 6-month and 1-year terms. 
C)  Residential mortgage-backed securities and asset-backed commercial paper. 
D)  A foreign exchange swap facility to address the global shortage of euro in financial markets. 
A)  Extension of collateral eligible for open market operations. 
B)  Longer term repos offered daily that provided funding for 6-month and 1-year terms. 
C)  Residential mortgage-backed securities and asset-backed commercial paper. 
D)  A foreign exchange swap facility to address the global shortage of euro in financial markets.

Question 12

Which of the following statements is true?

Accepted Answer

A)  Open market operations are interventions in the short-term money market by APRA to affect the cash interest rate. 
B)  Open market operations are interventions in the short-term money market by the RBA to affect the cash interest rate. 
C)  Open market operations are interventions in the long-term capital market by APRA to affect long-term interest rates. 
D)  Open market operations are interventions in the long-term capital market by the RBA to affect long-term interest rates. 
A)  Open market operations are interventions in the short-term money market by APRA to affect the cash interest rate. 
B)  Open market operations are interventions in the short-term money market by the RBA to affect the cash interest rate. 
C)  Open market operations are interventions in the long-term capital market by APRA to affect long-term interest rates. 
D)  Open market operations are interventions in the long-term capital market by the RBA to affect long-term interest rates.

Question 13

An FI can manage a drain on deposits or an exercise of a loan commitment in two major ways, these being purchased liquidity management and stored liquidity management.

Accepted Answer

A) True 
 B)False

Question 14

What are the possible ways that a bank can meet an expected net deposit drain of +4 per cent using purchased liquidity management techniques?

Accepted Answer

A)  Utilise the interbank funds market and repurchase agreements. 
B)  Utilise repurchase agreements. 
C)  Liquidate all cash holdings. 
D)  All of the listed options are correct. 
A)  Utilise the interbank funds market and repurchase agreements. 
B)  Utilise repurchase agreements. 
C)  Liquidate all cash holdings. 
D)  All of the listed options are correct.

Question 15

Distinguish between liquidity risk arising from the asset-side and the liability-side of the balance sheet.

Accepted Answer

Liquidity risk occurs because of situati

Question 16

When comparing banks and mutual funds, mutual funds have:

Accepted Answer

A)  more liquidity risk than banks because all shareholders share the loss of value on a pro rata basis. 
B)  less liquidity risk than banks because all shareholders share the loss of value on a pro rata basis. 
C)  more liquidity risk than banks because all shareholders have the ability to withdraw their money on a first-come first-served basis. 
D)  the same liquidity risk as banks because both shareholders and depositors share the fall in the loss of value on a pro rata basis. 
A)  more liquidity risk than banks because all shareholders share the loss of value on a pro rata basis. 
B)  less liquidity risk than banks because all shareholders share the loss of value on a pro rata basis. 
C)  more liquidity risk than banks because all shareholders have the ability to withdraw their money on a first-come first-served basis. 
D)  the same liquidity risk as banks because both shareholders and depositors share the fall in the loss of value on a pro rata basis.

Question 17

Use the following balance sheet (values in thousands of dollars) to answer the question.      If the bank experiences a $50 000 sudden liquidity drain caused by a loan commitment draw down, what will be the impact on the balance sheet if stored liquidity management techniques are used?

Accepted Answer

A)  A reduction in cash of $21 000 and an increase in demand deposits of $29 000. 
B)  A reduction in securities and/or current loans totalling $50 000. 
C)  A reduction in cash of $21 000 and a decrease in securities holdings of $29 000. 
D)  A decrease in equity of $50 000. 
A)  A reduction in cash of $21 000 and an increase in demand deposits of $29 000. 
B)  A reduction in securities and/or current loans totalling $50 000. 
C)  A reduction in cash of $21 000 and a decrease in securities holdings of $29 000. 
D)  A decrease in equity of $50 000.

Question 18

Which of the following statements is true?

Accepted Answer

A)  The liquidity required of an FI to enable it to meet the demand for liquidity that fluctuates with seasonal factors is referred to as the Christmas effect. 
B)  The liquidity required of an FI to enable it to meet the demand for liquidity that fluctuates with seasonal factors is called seasonal liquidity. 
C)  The liquidity required of an FI to enable it to meet the demand for liquidity that fluctuates with seasonal factors is referred to as the January effect. 
D)  The liquidity required of an FI to enable it to meet the demand for liquidity that fluctuates with seasonal factors is called the four seasons liquidity gap. 
A)  The liquidity required of an FI to enable it to meet the demand for liquidity that fluctuates with seasonal factors is referred to as the Christmas effect. 
B)  The liquidity required of an FI to enable it to meet the demand for liquidity that fluctuates with seasonal factors is called seasonal liquidity. 
C)  The liquidity required of an FI to enable it to meet the demand for liquidity that fluctuates with seasonal factors is referred to as the January effect. 
D)  The liquidity required of an FI to enable it to meet the demand for liquidity that fluctuates with seasonal factors is called the four seasons liquidity gap.

Question 19

Which of the following is not a potential cause of liquidity risk for a DI?

Accepted Answer

A)  A decrease in the DI's stock price caused by market factors. 
B)  An increase in requests to fund large amounts of loan commitments. 
C)  A decrease in the availability of short-term borrowed funds. 
D)  An increase in requests by depositors to withdrawal large amounts of deposits. 
A)  A decrease in the DI's stock price caused by market factors. 
B)  An increase in requests to fund large amounts of loan commitments. 
C)  A decrease in the availability of short-term borrowed funds. 
D)  An increase in requests by depositors to withdrawal large amounts of deposits.

Question 20

Bank panic refers to a contagious run on the deposits of:

Accepted Answer

A)  banking institutions in particular suburbs. 
B)  the big four banks. 
C)  all branches of a particular institution. 
D)  the banking industry as a whole. 
A)  banking institutions in particular suburbs. 
B)  the big four banks. 
C)  all branches of a particular institution. 
D)  the banking industry as a whole.

An investment fund that sells a fixed number of shares in the fund to outside investors is called:

Trend liquidity planning calculates an FI's liquidity need as the simple difference between the FI's liquid assets and its volatile sources of funds.

Which of the following statements is true?

Which of the following is not a component of liquidity planning?

Contingent liquidity needs refers to the liquidity needs necessary to:

Net deposit drains refer to the amount by which cash withdrawals:

Which of the following statements is true?

Fire-sale price refers to the price received for:

The Bank for International Settlements requires FIs to measure their liquidity positions under normal market conditions only.

APRA requires every FI to hold sufficient liquid assets to meet a name crisis situation.

The Reserve Bank of Australia (RBA) took a number of temporary actions during the global financial crisis to provide liquidity and avert financial system disturbance. Which of the following were not actions supplied by the RBA?

Which of the following statements is true?

An FI can manage a drain on deposits or an exercise of a loan commitment in two major ways, these being purchased liquidity management and stored liquidity management.

What are the possible ways that a bank can meet an expected net deposit drain of +4 per cent using purchased liquidity management techniques?

Distinguish between liquidity risk arising from the asset-side and the liability-side of the balance sheet.

When comparing banks and mutual funds, mutual funds have:

Use the following balance sheet (values in thousands of dollars) to answer the question. If the bank experiences a $50 000 sudden liquidity drain caused by a loan commitment draw down, what will be the impact on the balance sheet if stored liquidity management techniques are used?

Which of the following statements is true?

Which of the following is not a potential cause of liquidity risk for a DI?

Bank panic refers to a contagious run on the deposits of:

Why Are Financial Institutions Special

The Financial Services Industry: Depository Institutions

The Financial Services Industry: Other Financial Institutions

Risk of Financial Institutions

Interest Rate Risk Measurement: The Repricing Model

Interest Rate Risk Measurement: the Duration Model

Managing Interest Rate Risk Using Off Balance Sheet Instruments

Credit Risk I: Individual Loan Risk

Market Risk

Credit Risk I: Individual Loan Risk

Credit Risk II: Loan Portfolio and Concentration Risk

Sovereign Risk

Foreign Exchange Risk

Liability and Liquidity Management

Off-Balance-Sheet Activities

Technology and Other Operational Risk

Capital Management and Adequacy

Filters

Exam 14: Liquidity Risk

An investment fund that sells a fixed number of shares in the fund to outside investors is called:

Trend liquidity planning calculates an FI's liquidity need as the simple difference between the FI's liquid assets and its volatile sources of funds.

Which of the following statements is true?

Which of the following is not a component of liquidity planning?

Contingent liquidity needs refers to the liquidity needs necessary to:

Net deposit drains refer to the amount by which cash withdrawals:

Which of the following statements is true?

Fire-sale price refers to the price received for:

The Bank for International Settlements requires FIs to measure their liquidity positions under normal market conditions only.

APRA requires every FI to hold sufficient liquid assets to meet a name crisis situation.

The Reserve Bank of Australia (RBA) took a number of temporary actions during the global financial crisis to provide liquidity and avert financial system disturbance. Which of the following were not actions supplied by the RBA?

Which of the following statements is true?

An FI can manage a drain on deposits or an exercise of a loan commitment in two major ways, these being purchased liquidity management and stored liquidity management.

What are the possible ways that a bank can meet an expected net deposit drain of +4 per cent using purchased liquidity management techniques?

Distinguish between liquidity risk arising from the asset-side and the liability-side of the balance sheet.

When comparing banks and mutual funds, mutual funds have:

Use the following balance sheet (values in thousands of dollars) to answer the question. If the bank experiences a $50 000 sudden liquidity drain caused by a loan commitment draw down, what will be the impact on the balance sheet if stored liquidity management techniques are used?

Which of the following statements is true?

Which of the following is not a potential cause of liquidity risk for a DI?

Bank panic refers to a contagious run on the deposits of:

Why Are Financial Institutions Special

The Financial Services Industry: Depository Institutions

The Financial Services Industry: Other Financial Institutions

Risk of Financial Institutions

Interest Rate Risk Measurement: The Repricing Model

Interest Rate Risk Measurement: the Duration Model

Managing Interest Rate Risk Using Off Balance Sheet Instruments

Credit Risk I: Individual Loan Risk

Market Risk

Credit Risk I: Individual Loan Risk

Credit Risk II: Loan Portfolio and Concentration Risk

Sovereign Risk

Foreign Exchange Risk

Liability and Liquidity Management

Off-Balance-Sheet Activities

Technology and Other Operational Risk

Capital Management and Adequacy

Filters