Question 1

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

Accepted Answer

A)  Because it insulates the assets of an FI from normal drains on liability liquidity.
B)  Because funds can be easily raised in the eventuality of a liquidity crunch.
C)  Because of decrease in the cost of funds during periods of high interest rate volatility.
D)  Because the funds are covered by deposit insurance.
E)  Because the adjustment to the deposit drain occurs on the liability side of the balance sheet.F) A) and D)
G) All of the above

Question 2

What is the impact of a 50 basis point increase in interest rates on the net asset value of an open-end bond mutual fund holding a seven year, $100 million face value 7 percent annual coupon bond selling at par? The fund has 10 million shares.

Accepted Answer

A)  An increase of $0.24 per share.
B)  A decrease of $0.265 per share.
C)  An increase of $0.05 per share.
D)  A decrease of $0.05 per share.
E)  An increase of $0.265 per share.F) B) and E)
G) A) and B)

Question 3

During the financial crisis of 2008, there were large deposit outflows from the banking system.

Accepted Answer

A) True 
 B)False

Question 4

A contagious run, or bank panic, differs from a run on a bank in that a contagious run involves loss of faith in the entire banking system as opposed to just one bank.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)  Bonds.
B)  Federal fund.
C)  Demand deposit.
D)  Repurchase agreement.
E)  Subordinated note.F) B) and C)
G) A) and C)

Exam 12: Liquidity Risk

What is the impact of a 50 basis point increase in interest rates on the net asset value of an open-end bond mutual fund holding a seven year, $100 million face value 7 percent annual coupon bond selling at par? The fund has 10 million shares.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

A contagious run, or bank panic, differs from a run on a bank in that a contagious run involves loss of faith in the entire banking system as opposed to just one bank.

Correct Answer
verified

During the financial crisis of 2008, there were large deposit outflows from the banking system.

Correct Answer
verified

Exam 12: Liquidity Risk

What is the impact of a 50 basis point increase in interest rates on the net asset value of an open-end bond mutual fund holding a seven year, $100 million face value 7 percent annual coupon bond selling at par? The fund has 10 million shares.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A contagious run, or bank panic, differs from a run on a bank in that a contagious run involves loss of faith in the entire banking system as opposed to just one bank.

Correct AnswerverifiedShow Answer

During the financial crisis of 2008, there were large deposit outflows from the banking system.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified