Exam 11: Liquidity and Reserves Management: Strategies and Policies

If total legal reserves held are greater than required reserves,a bank has ____________.

Under a _________________________ strategy,some of the expected demands for liquidity are stored in assets,while others are backstopped by arrangements for lines of credit from banks or other suppliers of funds.

For several decades,the largest banks around the world have chosen _____________,which calls for borrowing immediately spendable funds to cover all anticipated demands for liquidity.

When some of a bank's expected demand for liquidity are stored in its assets,while other unexpected cash needs are met from near-term borrowings,the approach to liquidity management is known as:

The HTR Bank of Summerville has just calculated the ratios of its money market (short term)assets to volatile liabilities.Which liquidity indicator is this?

The Federal Reserve has been lowering deposit reserve requirements in recent years.

A U.S.bank can run up to a 5-percent deficit in its legal reserve requirement unconditionally without incurring an interest penalty from the Federal Reserve System.

The Taylor Treadwell Bank has just calculated the ratio of its demand deposits to total time deposits.Which liquidity indicator is this?

A(n)__________________ is an asset which can be converted into cash easily,which has a relatively stable price,and is reversible so that the sellers can recover their original investment with little risk of loss.

A manager that uses ratios such as cash and deposits due from banks to total assets and U.S.government securities to total assets to measure a firm's liquidity position is using:

Interest in banks' and financial service institutions' liquidity management is a relatively new phenomenon which arose following the 9/11 crisis.

Asset liquidity management (asset conversion)involves storing liquidity in assets,such as cash and marketable securities.

The method used in the U.S.to determine a bank's legal reserve requirement,in which the period for holding legal reserves follows the period used to calculate the required amount of legal reserves,is called ________________________.

A financial institution's liquidity gap represents the difference between its sources and uses of liquid funds.

The oldest approach to liquidity management is the asset liquidity management approach.

The liquidity indicator,core deposits divided by total assets,is a measure of stored liquidity.

A bank money manager estimates that the bank will experience a liquidity deficit of $400 million with a probability of 10 percent,a liquidity deficit of $900 million with a probability of 20 percent,a liquidity surplus of $600 million with a probability of 30 percent,and a liquidity surplus of $1,200 with a probability of 40 percent over the next month.What is this bank's expected liquidity deficit or surplus next month?

The liquidity problem for banks is made easier because depositors and borrowers are not sensitive to changing interest rates.

A bank currently has $50 million in stable deposits against which they want to keep 10% reserves,$100 in vulnerable deposits against which they want to keep 40% reserves,and they have $50 million in "hot money" deposits against which they want to keep 90% reserves.The legal reserves for this bank are 10% of all deposits.What is the bank's liability liquidity reserve?

The Fed funds market is most volatile on a bank: