Question 1

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 2

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

Question 3

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. 
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.

Question 4

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. 
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.

Question 5

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

Accepted Answer

A) True 
 B)False

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.

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

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.

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

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

Why Are Financial Institutions Special

Financial Services: Depository Institutions

Financial Services: Finance Companies

Financial Services: Securities Brokerage and Investment Banking

Financial Services: Mutual Funds and Hedge Funds

Financial Services: Insurance

Risks of Financial Institutions

Interest Rate Risk I

Interest Rate Risk II

Credit Risk: Individual Loan Risk

Credit Risk: Loan Portfolio and Concentration Risk

Foreign Exchange Risk

Sovereign Risk

Market Risk

Off-Balance-Sheet Risk

Technology and Other Operational Risks

Fintech Risks

Liability and Liquidity Management

Deposit Insurance and Other Liability Guarantees

Capital Adequacy

Product and Geographic Expansion

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization

Filters

Exam 12: Liquidity Risk

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.

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

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.

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

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

Why Are Financial Institutions Special

Financial Services: Depository Institutions

Financial Services: Finance Companies

Financial Services: Securities Brokerage and Investment Banking

Financial Services: Mutual Funds and Hedge Funds

Financial Services: Insurance

Risks of Financial Institutions

Interest Rate Risk I

Interest Rate Risk II

Credit Risk: Individual Loan Risk

Credit Risk: Loan Portfolio and Concentration Risk

Foreign Exchange Risk

Sovereign Risk

Market Risk

Off-Balance-Sheet Risk

Technology and Other Operational Risks

Fintech Risks

Liability and Liquidity Management

Deposit Insurance and Other Liability Guarantees

Capital Adequacy

Product and Geographic Expansion

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization

Filters