Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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 depositsE) A) and D)
F) B) and D)

Question 3

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; increasesE) B) and C)
F) C) and D)

Question 4

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 managementF) A) and B)
G) C) and E)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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 revenuesE) A) and C)
F) C) and D)

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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 fundsE) B) and C)
F) A) and C)

Question 10

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 aboveE) All of the above
F) B) and D)

Question 11

Collateralized commercial paper is issued by:

Accepted Answer

A)   banks
B)   Federal agencies
C)   special purpose corporations
D)   private corporationsE) All of the above
F) B) and C)

Question 12

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 depositsE) A) and B)
F) A) and C)

Question 13

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 aboveE) B) and C)
F) B) and D)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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 cF) B) and D)
G) A) and D)

Question 17

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 fundsE) All of the above
F) C) and D)

Question 18

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

Exam 11: Liquidity Management

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.

Correct Answer
verified

Funds management involves:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

The two approaches to meeting potential liquidity requirements are:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Collateralized commercial paper is issued by:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Liquidity practice in normal everyday operations is known as:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Exam 11: Liquidity Management

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.

Correct AnswerverifiedShow Answer

Funds management involves:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The two approaches to meeting potential liquidity requirements are:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Collateralized commercial paper is issued by:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Liquidity practice in normal everyday operations is known as:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct Answer
verified