Exam 19: Liability and Liquidity Management

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. The minimum reserves that may be maintained toward the next reserve maintenance period, September 23 to October 6, is

Which of the following is considered to be the most liquid asset?

Is the bank in compliance with the requirements?

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

For reserve computation purposes, Friday balances

The advantage to a lender in a repurchase agreement transaction versus a fed funds sale is the collateral of government securities or other acceptable liquid assets provided by the borrowing FI.

One method that may be employed by banks to lower required reserves is to

The reserve computation period for determining required reserves covers the 14 days of a two-week period that runs from Monday to Monday.

The DI can influence the withdrawal rates of NOW accounts through explicit interest payments, implicit interest payments, or minimum balance requirements.

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

Fed funds are subject to settlement risk, but have little or no early withdrawal risk.

Because retail CDs have fixed maturities, FI managers always should have perfect information regarding the scheduling of interest and principal payments.

Many states in the U.S.impose liquid asset ratios on insurance companies which may be met by

FIs participating in the fed funds market, either buying or selling, are usually able to do so without amount or maturity restrictions.

What is the major distinction between NOW accounts and traditional demand deposits?

The minimum daily average reserve requirement is computed by

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