Question 1

As of August 2015,required reserve ratios in the U.S.for demand deposits were

Accepted Answer

A) 0 percent,3 percent,and 10 percent. 
B) 10 percent on all deposits. 
C) 3 percent on all deposits. 
D) 0 percent on all deposits. 
A) 0 percent,3 percent,and 10 percent. 
B) 10 percent on all deposits. 
C) 3 percent on all deposits. 
D) 0 percent on all deposits.

Question 2

The concept of constrained optimization facing an FI manager involving the minimum amount of liquid reserve assets required by regulators may

Accepted Answer

A) penalize the FI if the minimum amount is less than the amount warranted by the actual withdrawal risk. 
B) benefit the FI if the minimum amount is more than is warranted by actual withdrawal risk. 
C) lead to increased withdrawals by depositors that do not meet the minimum requirement. 
D) assist the FI manager by providing an optimal target amount of reserves that will exactly match withdrawal expectations. 
A) penalize the FI if the minimum amount is less than the amount warranted by the actual withdrawal risk. 
B) benefit the FI if the minimum amount is more than is warranted by actual withdrawal risk. 
C) lead to increased withdrawals by depositors that do not meet the minimum requirement. 
D) assist the FI manager by providing an optimal target amount of reserves that will exactly match withdrawal expectations.

Question 3

NOW accounts are potentially less prone to withdrawal risk than demand deposits.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following liability products does NOT include transaction privileges?

Accepted Answer

A) Demand deposit accounts. 
B) NOW accounts. 
C) Passbook savings accounts. 
D) Money market deposit accounts. 
A) Demand deposit accounts. 
B) NOW accounts. 
C) Passbook savings accounts. 
D) Money market deposit accounts.

Question 5

Deposits with low withdrawal risk typically are the lowest cost deposits for a DI.

Accepted Answer

A) True 
 B)False

Question 6

The weekend game is

Accepted Answer

A) a strategy to reduce bank interest rate risk exposure. 
B) a strategy to reduce bank liquidity risk exposure. 
C) a strategy to reduce the cost of meeting reserve requirements. 
D) the buying and selling of Fed funds late Friday afternoon. 
A) a strategy to reduce bank interest rate risk exposure. 
B) a strategy to reduce bank liquidity risk exposure. 
C) a strategy to reduce the cost of meeting reserve requirements. 
D) the buying and selling of Fed funds late Friday afternoon.

Question 7

In the U.S. ,cash reserves necessary to meet deposit reserve requirements typically include vault cash and cash deposits at the Federal Reserve Bank.

Accepted Answer

A) True 
 B)False

Question 8

Holding small amounts of liquid assets could cause an FI to be unable to meet the claims of liability holders.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following observations concerning repurchase agreements is NOT true?

Accepted Answer

A) They can be viewed as collateralized federal funds transactions. 
B) The RP market is a highly liquid and flexible source of funds for DIs needing to increase their liabilities and to offset deposit withdrawals. 
C) Unlike fed funds,these transactions cannot be rolled over each day. 
D) It is difficult to transact an RP borrowing late in the day. 
A) They can be viewed as collateralized federal funds transactions. 
B) The RP market is a highly liquid and flexible source of funds for DIs needing to increase their liabilities and to offset deposit withdrawals. 
C) Unlike fed funds,these transactions cannot be rolled over each day. 
D) It is difficult to transact an RP borrowing late in the day.

Question 10

Is the bank in compliance with the requirements?

Accepted Answer

A) No,it does not meet the minimum reserve requirements. 
B) Yes,it meets the minimum reserve requirements. 
C) Yes,it meets the minimum requirement only after using the 2 percent carryover allowance. 
D) Yes,it meets the minimum requirement only after using the 4 percent carryover allowance. 
E) No,it does not meet the minimum reserve requirements even after using the 4 percent carryover allowance. 
A) No,it does not meet the minimum reserve requirements. 
B) Yes,it meets the minimum reserve requirements. 
C) Yes,it meets the minimum requirement only after using the 2 percent carryover allowance. 
D) Yes,it meets the minimum requirement only after using the 4 percent carryover allowance. 
E) No,it does not meet the minimum reserve requirements even after using the 4 percent carryover allowance.

Question 11

In the U.S. ,a subsidiary bank can issue commercial paper to meet short-term liquidity needs,but the bank's parent holding company cannot.

Accepted Answer

A) True 
 B)False

Question 12

The interest rate paid on money market deposit accounts by U.S.DIs must directly reflect the rates earned on investments in commercial paper,bankers acceptances,repurchase agreement,and T-bills.

Accepted Answer

A) True 
 B)False

Question 13

A bank has an average balance of transactions accounts,August 10 to 23,of $824.46 million.The average balance in the cash account is $42.014 million over this period.The bank is carrying forward a deficit of $1.276 million from the last reserve period.The rules require no reserves to be maintained for the first $8.5 million,3 percent for amounts between $8.5 million and $45.8 million,and 10 percent thereafter.

What is the reserve to be maintained with fed?

Accepted Answer

A) $38.247 million. 
B) $34.419 million. 
C) $36.971 million. 
D) $35.087 million. 
A) $38.247 million. 
B) $34.419 million. 
C) $36.971 million. 
D) $35.087 million.

Question 14

The DI manager can change the pricing on NOW accounts by changing both implicit and explicit interest payments.

Accepted Answer

A) True 
 B)False

Question 15

Federal Reserve primary credit loans available to DIs are generally at rates lower than the federal funds target rate.

Accepted Answer

A) True 
 B)False

Question 16

Up to six percent of excess reserves may be carried forward to the next reserve maintenance period.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is an outcome of an increase in the reserve requirement ratio?

Accepted Answer

A) DIs may hold fewer reserves against their transaction accounts. 
B) DIs are able to lend out a greater percentage of their deposits. 
C) Increased credit availability in the economy. 
D) DIs are only able to lend a smaller percentage of their deposits than before. 
A) DIs may hold fewer reserves against their transaction accounts. 
B) DIs are able to lend out a greater percentage of their deposits. 
C) Increased credit availability in the economy. 
D) DIs are only able to lend a smaller percentage of their deposits than before.

Question 18

The interbank funds market is a potential source for increasing reserves to meet required reserves.

Accepted Answer

A) True 
 B)False

Question 19

MMDAs are considered to be more liquid than demand deposits and NOW accounts.

Accepted Answer

A) True 
 B)False

Question 20

Under the lagged reserve accounting system,the

Accepted Answer

A) reserve maintenance period is two days longer than the reserve computation period. 
B) reserve maintenance period starts two days after the start of the reserve computation period. 
C) reserve maintenance period does not begin until seventeen days after the end of the computation period. 
D) reserve computation period starts on the same date as the reserve maintenance period. 
A) reserve maintenance period is two days longer than the reserve computation period. 
B) reserve maintenance period starts two days after the start of the reserve computation period. 
C) reserve maintenance period does not begin until seventeen days after the end of the computation period. 
D) reserve computation period starts on the same date as the reserve maintenance period.

Exam 18: Liability and Liquidity Management

As of August 2015,required reserve ratios in the U.S.for demand deposits were

The concept of constrained optimization facing an FI manager involving the minimum amount of liquid reserve assets required by regulators may

NOW accounts are potentially less prone to withdrawal risk than demand deposits.

Which of the following liability products does NOT include transaction privileges?

Deposits with low withdrawal risk typically are the lowest cost deposits for a DI.

The weekend game is

In the U.S. ,cash reserves necessary to meet deposit reserve requirements typically include vault cash and cash deposits at the Federal Reserve Bank.

Holding small amounts of liquid assets could cause an FI to be unable to meet the claims of liability holders.

Which of the following observations concerning repurchase agreements is NOT true?

Is the bank in compliance with the requirements?

In the U.S. ,a subsidiary bank can issue commercial paper to meet short-term liquidity needs,but the bank's parent holding company cannot.

The interest rate paid on money market deposit accounts by U.S.DIs must directly reflect the rates earned on investments in commercial paper,bankers acceptances,repurchase agreement,and T-bills.

The DI manager can change the pricing on NOW accounts by changing both implicit and explicit interest payments.

Federal Reserve primary credit loans available to DIs are generally at rates lower than the federal funds target rate.

Up to six percent of excess reserves may be carried forward to the next reserve maintenance period.

Which of the following is an outcome of an increase in the reserve requirement ratio?

The interbank funds market is a potential source for increasing reserves to meet required reserves.

MMDAs are considered to be more liquid than demand deposits and NOW accounts.

Under the lagged reserve accounting system,the

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