Exam 12: Liquidity Risk

Consider a mutual fund with 100 shareholders who each invested $10 for a total of $1,000.If the assets of the mutual fund are worth $900,what is the net asset value for each one of the mutual fund shares?

The liquidity coverage ratio for a DI incorporates an "acute liquidity stress scenario" specified by banking supervisors.

Which of the following observations is NOT true?

A bank's net deposit drain

The assets of PC insurers are relatively short term and more liquid than those of life insurance companies.

Which of the following statements is true?

Deposit insurance is the only deterrent to bank runs,contagious runs,and bank panics.

Open-end mutual funds issue a fixed number of shares classified as liabilities.

In terms of liquidity risk measurement,the financing requirement is defined as

Depository institutions generally rely on each other for cash and to meet their daily liquidity needs.

Most demand deposits stay at DIs for periods of two years or more.

Which of the following is a condition for a DI to be growing?

A disadvantage of using purchased liquidity management to manage a FI's liquidity risk is

Abnormally large and unexpected deposit withdrawals can occur because of concerns by depositors about a bank's solvency relative to other banks.

Which of the following balance sheet entries is not a tool used in purchased liquidity management?

What is the drawback of deposit insurance facility?

Bank runs occur because customers know that banks will be forced to liquidate assets at fire-sale prices.

In terms of liquidity risk measurement,the financing gap is defined as

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?

Why have purchased liquidity management techniques become very popular in spite of its limitations?