Question 1

Which of the following items are sources of stored liquidity?

Accepted Answer

A) interbank market loans 
B) large certificates of deposits 
C) interbank market for exchange settlement funds 
D) semi-government securities 
A) interbank market loans 
B) large certificates of deposits 
C) interbank market for exchange settlement funds 
D) semi-government securities

Question 2

Which of the following is a mechanism used by FI managers to reduce demand deposit withdrawal rates?

Accepted Answer

A) implicit interest payments 
B) minimum balance requirements 
C) explicit interest payments 
D) There is no way to mitigate withdrawal risk. 
A) implicit interest payments 
B) minimum balance requirements 
C) explicit interest payments 
D) There is no way to mitigate withdrawal risk.

Question 3

The net stable funding ratio requirement promotes a more diversified, stable funding base that ensures that short-term assets are funded by stable liabilities.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

NCDs are short-term, fixed-term deposits and are known as wholesale CDs, which have a face value of below $100 000.

Accepted Answer

A) True 
 B)False

Question 6

What does 'constrained optimisation' in the context of liquidity management refer to?

Accepted Answer

A) It refers to the case that any liquid asset holdings over and above the reserve requirements imposed by regulators need to be balanced by the same amount of short-term liabilities. 
B) It refers to the case that any increases in an FI's current liability holdings incur a decrease in the profitability of the FI's liquidity holdings. 
C) It refers to the case that any liquid asset reserve requirements imposed by regulators set a minimum bound on the level of liquid reserve assets in the balance sheet. 
D) It refers to the case that any liquid asset reserve requirements imposed by regulators need to be balanced by the same amount of short-term liabilities. 
A) It refers to the case that any liquid asset holdings over and above the reserve requirements imposed by regulators need to be balanced by the same amount of short-term liabilities. 
B) It refers to the case that any increases in an FI's current liability holdings incur a decrease in the profitability of the FI's liquidity holdings. 
C) It refers to the case that any liquid asset reserve requirements imposed by regulators set a minimum bound on the level of liquid reserve assets in the balance sheet. 
D) It refers to the case that any liquid asset reserve requirements imposed by regulators need to be balanced by the same amount of short-term liabilities.

Question 7

FIs are particularly vulnerable to sudden and unexpected demand for funds.Liquidity regulations are imposed for all of the following reasons, except to:

Accepted Answer

A) ensure that authorised DIs have sufficient liquidity. 
B) prevent liquidity problems and possible contagion effects that may spread to other FIs. 
C) increase liquidity for prudential management. 
D) ensure that authorised DIs have sufficient capital. 
A) ensure that authorised DIs have sufficient liquidity. 
B) prevent liquidity problems and possible contagion effects that may spread to other FIs. 
C) increase liquidity for prudential management. 
D) ensure that authorised DIs have sufficient capital.

Question 8

Why have regulators of financial service firms in Australia introduced the deposit guarantee programs? Why may regulators seek to provide greater protection to depositors than to other DI creditors?

Accepted Answer

Bank runs are costly to society since th

Question 9

Use the following information to answer the question. A current deposit account requires a minimum balance of $500 if annual interest of 5 per cent is to be earned monthly on its deposits.An account holder has maintained an average balance of $300 for the first nine months of the year and $800 for the last three months of the year.She has written an average of 20 cheques a month and is not charged for these services.However, it costs the bank $0.02 to process each cheque.
The bank would like to limit the average return (both explicit and implicit) earned by the account holder to 5 per cent per year.How much should it charge for processing each check to this Account holder assuming that it will pay annual interest of 5 per cent and minimum balances of $200 are maintained?

Accepted Answer

A) 1 cent per cheque 
B) 2 cents per cheque 
C) 3 cents per cheque 
D) 4 cents per cheque. 
A) 1 cent per cheque 
B) 2 cents per cheque 
C) 3 cents per cheque 
D) 4 cents per cheque.

Question 10

Which of the following statements is true?

Accepted Answer

A) Liquid assets pay high interest rates. 
B) Liquid assets bear low default risk. 
C) Holding a high proportion of funds in liquid assets will result in increased profitability. 
D) All of the listed options are correct. 
A) Liquid assets pay high interest rates. 
B) Liquid assets bear low default risk. 
C) Holding a high proportion of funds in liquid assets will result in increased profitability. 
D) All of the listed options are correct.

Question 11

Which of the following statements is true?

Accepted Answer

A) Australian DI payments are processed through either RTGS or RITS. 
B) Australian DI payments are processed through either RTGS or CHESS. 
C) Australian DI payments are processed through either RTGS or ESA. 
D) Australian DI payments are processed through either RTGS or DNSS. 
A) Australian DI payments are processed through either RTGS or RITS. 
B) Australian DI payments are processed through either RTGS or CHESS. 
C) Australian DI payments are processed through either RTGS or ESA. 
D) Australian DI payments are processed through either RTGS or DNSS.

Question 12

Which of the following statements is true?

Accepted Answer

A) Treasury bonds are short-term instruments. 
B) Corporate promissory notes are long-term instruments. 
C) Corporate bonds are long-term instruments. 
D) Semi-government bonds are short-term instruments. 
A) Treasury bonds are short-term instruments. 
B) Corporate promissory notes are long-term instruments. 
C) Corporate bonds are long-term instruments. 
D) Semi-government bonds are short-term instruments.

Question 13

A committed liquidity facility is a:

Accepted Answer

A) facility that allows the FI to access funds from the RBA to obtain liquidity to meets its settlement needs. 
B) liquidity facility that allows the FI to access funds from the RBA to obtain liquidity to meets its short-term needs. 
C) liquidity facility that allows the FI to access funds from the RBA to obtain liquidity to meets its long-term needs. 
D) facility providing a secured line of credit from the RBA to allow access to liquid assets to meet Basel III liquidity reforms. 
A) facility that allows the FI to access funds from the RBA to obtain liquidity to meets its settlement needs. 
B) liquidity facility that allows the FI to access funds from the RBA to obtain liquidity to meets its short-term needs. 
C) liquidity facility that allows the FI to access funds from the RBA to obtain liquidity to meets its long-term needs. 
D) facility providing a secured line of credit from the RBA to allow access to liquid assets to meet Basel III liquidity reforms.

Question 14

Covered bonds are issued by:

Accepted Answer

A) NBFIs and must have a pool of assets covering the bonds that meet 105 per cent of the face value of the outstanding covered bonds. 
B) depository institutions and must have a pool of assets covering the bonds that meet 105 per cent of the face value of the outstanding covered bonds. 
C) by depository institutions and must have a pool of assets covering the bonds that meet 100 per cent of the face value of the outstanding covered bonds. 
D) depository institutions and must have a pool of assets covering the bonds that meet 103 per cent of the face value of the outstanding covered bonds. 
A) NBFIs and must have a pool of assets covering the bonds that meet 105 per cent of the face value of the outstanding covered bonds. 
B) depository institutions and must have a pool of assets covering the bonds that meet 105 per cent of the face value of the outstanding covered bonds. 
C) by depository institutions and must have a pool of assets covering the bonds that meet 100 per cent of the face value of the outstanding covered bonds. 
D) depository institutions and must have a pool of assets covering the bonds that meet 103 per cent of the face value of the outstanding covered bonds.

Question 15

Potential sources of liquidity include investment in:

Accepted Answer

A) housing loans. 
B) new equipment. 
C) short-term securities such as treasury notes and bank accepted bills. 
D) housing loans and investment in bank accepted bills. 
A) housing loans. 
B) new equipment. 
C) short-term securities such as treasury notes and bank accepted bills. 
D) housing loans and investment in bank accepted bills.

Question 16

Which of the following statements is true?

Accepted Answer

A) The issuers of Treasury notes are local governments. 
B) The issuers of Treasury notes are state governments. 
C) The issuer of Treasury notes is the Australian federal government. 
D) The issuers of Treasury notes are corporations. 
A) The issuers of Treasury notes are local governments. 
B) The issuers of Treasury notes are state governments. 
C) The issuer of Treasury notes is the Australian federal government. 
D) The issuers of Treasury notes are corporations.

Question 17

Which of the following statements is true?

Accepted Answer

A) Bank accepted bills classify as purchased liquidity. 
B) Loans to short-term money market dealers classify as purchased liquidity. 
C) Securities sold under agreements to repurchase classify as stored liquidity. 
D) Certificates of deposits classify as stored liquidity. 
A) Bank accepted bills classify as purchased liquidity. 
B) Loans to short-term money market dealers classify as purchased liquidity. 
C) Securities sold under agreements to repurchase classify as stored liquidity. 
D) Certificates of deposits classify as stored liquidity.

Question 18

Authorised depository institutions' liquidity management strategy includes the following elements except:

Accepted Answer

A) an informal contingency plan to deal with a liquidity crisis. 
B) defined managerial responsibilities and controls. 
C) a liquidity management policy statement approved by the FI's board. 
D) a system for measuring, assessing and reporting liquidity. 
A) an informal contingency plan to deal with a liquidity crisis. 
B) defined managerial responsibilities and controls. 
C) a liquidity management policy statement approved by the FI's board. 
D) a system for measuring, assessing and reporting liquidity.

Question 19

APS210 specifies that 'high-quality liquid assets' must be free from encumbrances and include:

Accepted Answer

A) cash. 
B) long-term loans. 
C) cash and eligible securities approved by APRA. 
D) cash and long-term loans. 
A) cash. 
B) long-term loans. 
C) cash and eligible securities approved by APRA. 
D) cash and long-term loans.

Question 20

Which of the following statements is true?

Accepted Answer

A) Australian FIs are required to hold a minimum of three days' estimated cash requirements to enable them to manage a short run on deposits. 
B) Australian FIs are required to hold a minimum of five days' estimated cash requirements to enable them to manage a short run on deposits. 
C) Australian FIs are required to hold a minimum of seven days' estimated cash requirements to enable them to manage a short run on deposits. 
D) None of the listed options are correct. 
A) Australian FIs are required to hold a minimum of three days' estimated cash requirements to enable them to manage a short run on deposits. 
B) Australian FIs are required to hold a minimum of five days' estimated cash requirements to enable them to manage a short run on deposits. 
C) Australian FIs are required to hold a minimum of seven days' estimated cash requirements to enable them to manage a short run on deposits. 
D) None of the listed options are correct.

Which of the following items are sources of stored liquidity?

Which of the following is a mechanism used by FI managers to reduce demand deposit withdrawal rates?

The net stable funding ratio requirement promotes a more diversified, stable funding base that ensures that short-term assets are funded by stable liabilities.

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

NCDs are short-term, fixed-term deposits and are known as wholesale CDs, which have a face value of below $100 000.

What does 'constrained optimisation' in the context of liquidity management refer to?

FIs are particularly vulnerable to sudden and unexpected demand for funds.Liquidity regulations are imposed for all of the following reasons, except to:

Why have regulators of financial service firms in Australia introduced the deposit guarantee programs? Why may regulators seek to provide greater protection to depositors than to other DI creditors?

Which of the following statements is true?

Which of the following statements is true?

Which of the following statements is true?

A committed liquidity facility is a:

Covered bonds are issued by:

Potential sources of liquidity include investment in:

Which of the following statements is true?

Which of the following statements is true?

Authorised depository institutions' liquidity management strategy includes the following elements except:

APS210 specifies that 'high-quality liquid assets' must be free from encumbrances and include:

Which of the following statements is true?

Why Are Financial Institutions Special

The Financial Services Industry: Depository Institutions

The Financial Services Industry: Other Financial Institutions

Risk of Financial Institutions

Interest Rate Risk Measurement: The Repricing Model

Interest Rate Risk Measurement: The Duration Model

Managing Interest Rate Risk Using Off Balance Sheet Instruments

Credit Risk I: Individual Loan Risk

Market Risk

Credit Risk I: Individual Loan Risk

Credit Risk II: Loan Portfolio and Concentration Risk

Sovereign Risk

Foreign Exchange Risk

Liquidity Risk

Off-Balance-Sheet Activities

Technology and Other Operational Risk

Capital Management and Adequacy

Filters

Exam 15: Liability and Liquidity Management

Which of the following items are sources of stored liquidity?

Which of the following is a mechanism used by FI managers to reduce demand deposit withdrawal rates?

The net stable funding ratio requirement promotes a more diversified, stable funding base that ensures that short-term assets are funded by stable liabilities.

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

NCDs are short-term, fixed-term deposits and are known as wholesale CDs, which have a face value of below $100 000.

What does 'constrained optimisation' in the context of liquidity management refer to?

FIs are particularly vulnerable to sudden and unexpected demand for funds.Liquidity regulations are imposed for all of the following reasons, except to:

Why have regulators of financial service firms in Australia introduced the deposit guarantee programs? Why may regulators seek to provide greater protection to depositors than to other DI creditors?

Which of the following statements is true?

Which of the following statements is true?

Which of the following statements is true?

A committed liquidity facility is a:

Covered bonds are issued by:

Potential sources of liquidity include investment in:

Which of the following statements is true?

Which of the following statements is true?

Authorised depository institutions' liquidity management strategy includes the following elements except:

APS210 specifies that 'high-quality liquid assets' must be free from encumbrances and include:

Which of the following statements is true?

Why Are Financial Institutions Special

The Financial Services Industry: Depository Institutions

The Financial Services Industry: Other Financial Institutions

Risk of Financial Institutions

Interest Rate Risk Measurement: The Repricing Model

Interest Rate Risk Measurement: The Duration Model

Managing Interest Rate Risk Using Off Balance Sheet Instruments

Credit Risk I: Individual Loan Risk

Market Risk

Credit Risk I: Individual Loan Risk

Credit Risk II: Loan Portfolio and Concentration Risk

Sovereign Risk

Foreign Exchange Risk

Liquidity Risk

Off-Balance-Sheet Activities

Technology and Other Operational Risk

Capital Management and Adequacy

Filters