Question 1

Bills of exchange issued by a non-bank drawer to raise funds for its business purposes and accepted by a non-bank corporation are:

Accepted Answer

A) commercial bills 
B) corporate bonds 
C) rights issue 
D) None of the listed options are correct. 
A) commercial bills 
B) corporate bonds 
C) rights issue 
D) None of the listed options are correct. A

Question 2

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 A

Question 3

Assume the average management cost per account per year is $200 and the average fees earned per account per year is $170.The average annual size of account is $1800.What is the average implicit interest rate (round to two decimals)?

Accepted Answer

A) -1.67% 
B) 1.67% 
C) 4.86% 
D) 15% 
A) -1.67% 
B) 1.67% 
C) 4.86% 
D) 15% B

Question 4

Which of the following liability products does not have withdrawal risk?

Accepted Answer

A) wholesale CDs 
B) money market deposit accounts 
C) cheque and retail saving accounts 
D) All of the given options have withdrawal risk. 
A) wholesale CDs 
B) money market deposit accounts 
C) cheque and retail saving accounts 
D) All of the given options have withdrawal risk.

Question 5

Graphically show the relationship between funding cost and funding or withdrawal risk.Explain your graph.

Accepted Answer

A DI has to trade off the benefits of at

Question 6

Which of the following statements is true?

Accepted Answer

A) In the current situation, only small FIs have to hold 9% of their liabilities in specified high-quality liquefiable assets. 
B) Currently, FIs are required to have in place a regulator-approved liquidity management strategy. 
C) Currently, FIs are not subject to the user-pays approach. 
D) Currently, FIs are required to have in place a regulator-approved liquidity management strategy and only small FIs have to hold 9% of their liabilities in specified high-quality liquefiable assets. 
A) In the current situation, only small FIs have to hold 9% of their liabilities in specified high-quality liquefiable assets. 
B) Currently, FIs are required to have in place a regulator-approved liquidity management strategy. 
C) Currently, FIs are not subject to the user-pays approach. 
D) Currently, FIs are required to have in place a regulator-approved liquidity management strategy and only small FIs have to hold 9% of their liabilities in specified high-quality liquefiable assets.

Question 7

Which of the following statements relating to required stable funding is true?

Accepted Answer

A) The required stable funding (RSF) is found by subtracting the value of assets held and funded by the FI, multiplied by a specific RSF factor assigned to specific asset types. 
B) The RSF is found by adding the value of assets held and funded by the FI, multiplied by a specific RSF factor assigned to specific asset types. 
C) Assets that are more liquid receive a higher RSF factor. 
D) The RSF amount is determined by the liquidity characteristics of the FI's various on-balance-sheet contingent exposures. 
A) The required stable funding (RSF) is found by subtracting the value of assets held and funded by the FI, multiplied by a specific RSF factor assigned to specific asset types. 
B) The RSF is found by adding the value of assets held and funded by the FI, multiplied by a specific RSF factor assigned to specific asset types. 
C) Assets that are more liquid receive a higher RSF factor. 
D) The RSF amount is determined by the liquidity characteristics of the FI's various on-balance-sheet contingent exposures.

Question 8

Which of the following statements is true?

Accepted Answer

A) An increase in the liquidation costs of non-liquid assets encourages an FI to shift more funds into more liquid, lower yielding assets. 
B) A decrease in the yield of non-liquid assets will reduce holdings of liquid assets due to higher opportunity costs of holding liquid assets. 
C) The greater the volatility of the level of deposits, the greater the optimal proportion of reserve assets held to deposits. 
D) An increase in the liquidation costs of non-liquid assets encourages an FI to reduce their holdings of more liquid, lower yielding assets. 
A) An increase in the liquidation costs of non-liquid assets encourages an FI to shift more funds into more liquid, lower yielding assets. 
B) A decrease in the yield of non-liquid assets will reduce holdings of liquid assets due to higher opportunity costs of holding liquid assets. 
C) The greater the volatility of the level of deposits, the greater the optimal proportion of reserve assets held to deposits. 
D) An increase in the liquidation costs of non-liquid assets encourages an FI to reduce their holdings of more liquid, lower yielding assets.

Question 9

A deep market is defined as a market in which low volumes of a particular security are traded.

Accepted Answer

A) True 
 B)False

Question 10

What are the withdrawal risks and costs associated with the covered bonds?

Accepted Answer

@#LAT-DLM&
Covered bonds are bonds issued by a ban

Question 11

Use the following information to answer the question: A current deposit account requires a minimum balance of $500 if annual interest of 5% 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.What is the average return earned (both explicit and implicit) by the account holder over the full year?

Accepted Answer

A) 2.98% 
B) 3.48% 
C) 4.28% 
D) 4.79% 
A) 2.98% 
B) 3.48% 
C) 4.28% 
D) 4.79%

Question 12

Funding costs generally are positively related to the period of time the liability remains on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 13

The contagious effect:

Accepted Answer

A) stems from the positive correlation in FI returns 
B) results when interest rate risk increases credit risk and liquidity risk exposures 
C) occurs when liquidity risk problems at bad banks damage well-run banks 
D) is completely eliminated by government provided deposit insurance against bank runs 
A) stems from the positive correlation in FI returns 
B) results when interest rate risk increases credit risk and liquidity risk exposures 
C) occurs when liquidity risk problems at bad banks damage well-run banks 
D) is completely eliminated by government provided deposit insurance against bank runs

Question 14

Which of the following observations concerning repurchase agreements is not true?

Accepted Answer

A) They can be viewed as collateralised short-term loans where a financial security is swapped for cash. 
B) The repurchase market is a highly liquid and flexible source of funds for DIs needing to access liquidity to offset deposit withdrawals. 
C) Repos under the intra-day facility system are discouraged and attract an interest rate charge of 25 basis points above the target cash rate. 
D) It is difficult to transact a repurchase agreement borrowing late in the day. 
A) They can be viewed as collateralised short-term loans where a financial security is swapped for cash. 
B) The repurchase market is a highly liquid and flexible source of funds for DIs needing to access liquidity to offset deposit withdrawals. 
C) Repos under the intra-day facility system are discouraged and attract an interest rate charge of 25 basis points above the target cash rate. 
D) It is difficult to transact a repurchase agreement borrowing late in the day.

Question 15

Debt instruments that are backed by a segregated pool of high-quality assets which remain on the DI's balance sheet are covered bonds

Accepted Answer

A) True 
 B)False

Question 16

What are the withdrawal risks and costs associated with the following types of liabilities?

Accepted Answer

(a) cheque account and other demand depo

Question 17

What is the average implicit interest rate on a $100 000 account if the bank's average management costs are $2500 and annual fees average $1750?

Accepted Answer

A) 2.50% 
B) 1.75% 
C) 0.75% 
D) -0.75% 
A) 2.50% 
B) 1.75% 
C) 0.75% 
D) -0.75%

Question 18

Liquid asset ratio describes:

Accepted Answer

A) the minimum ratio of liquid assets to total equity set by the central bank. 
B) the minimum ratio of liquid assets to total liabilities set by the central bank 
C) the minimum ratio of liquid assets to total assets set by the central bank. 
D) None of the listed options are correct. 
A) the minimum ratio of liquid assets to total equity set by the central bank. 
B) the minimum ratio of liquid assets to total liabilities set by the central bank 
C) the minimum ratio of liquid assets to total assets set by the central bank. 
D) None of the listed options are correct.

Question 19

The Reserve Bank of Australia has responsibility for providing depositor protection.This is seen as:

Accepted Answer

A) a blanket guarantee for all deposits and a protection against all FIs' failure 
B) the RBA using its available powers in the interest of protecting depositors' funds 
C) deposit insurance for all FIs 
D) All of the listed options are correct. 
A) a blanket guarantee for all deposits and a protection against all FIs' failure 
B) the RBA using its available powers in the interest of protecting depositors' funds 
C) deposit insurance for all FIs 
D) All of the listed options are correct.

Question 20

Historically, asset liquidity was the primary method by which banks met cash demands.

Accepted Answer

A) True 
 B)False

Bills of exchange issued by a non-bank drawer to raise funds for its business purposes and accepted by a non-bank corporation are:

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

Assume the average management cost per account per year is $200 and the average fees earned per account per year is $170.The average annual size of account is $1800.What is the average implicit interest rate (round to two decimals)?

Which of the following liability products does not have withdrawal risk?

Graphically show the relationship between funding cost and funding or withdrawal risk.Explain your graph.

Which of the following statements is true?

Which of the following statements relating to required stable funding is true?

Which of the following statements is true?

A deep market is defined as a market in which low volumes of a particular security are traded.

What are the withdrawal risks and costs associated with the covered bonds?

Funding costs generally are positively related to the period of time the liability remains on the balance sheet.

The contagious effect:

Which of the following observations concerning repurchase agreements is not true?

Debt instruments that are backed by a segregated pool of high-quality assets which remain on the DI's balance sheet are covered bonds

What are the withdrawal risks and costs associated with the following types of liabilities?

What is the average implicit interest rate on a $100 000 account if the bank's average management costs are $2500 and annual fees average $1750?

Liquid asset ratio describes:

The Reserve Bank of Australia has responsibility for providing depositor protection.This is seen as:

Historically, asset liquidity was the primary method by which banks met cash demands.

Why Are Financial Institutions Special

The Financial Service Industry: Depository Institutions

The Financial Service Industry: Other Financial Institutions

Risks 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

Managing Interest Rate Risk Using Securitisation

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 Risks

Capital Management and Adequacy

Filters

Exam 15: Liability and Liquidity Management

Bills of exchange issued by a non-bank drawer to raise funds for its business purposes and accepted by a non-bank corporation are:

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

Assume the average management cost per account per year is $200 and the average fees earned per account per year is $170.The average annual size of account is $1800.What is the average implicit interest rate (round to two decimals)?

Which of the following liability products does not have withdrawal risk?

Graphically show the relationship between funding cost and funding or withdrawal risk.Explain your graph.

Which of the following statements is true?

Which of the following statements relating to required stable funding is true?

Which of the following statements is true?

A deep market is defined as a market in which low volumes of a particular security are traded.

What are the withdrawal risks and costs associated with the covered bonds?

Funding costs generally are positively related to the period of time the liability remains on the balance sheet.

The contagious effect:

Which of the following observations concerning repurchase agreements is not true?

Debt instruments that are backed by a segregated pool of high-quality assets which remain on the DI's balance sheet are covered bonds

What are the withdrawal risks and costs associated with the following types of liabilities?

What is the average implicit interest rate on a $100 000 account if the bank's average management costs are $2500 and annual fees average $1750?

Liquid asset ratio describes:

The Reserve Bank of Australia has responsibility for providing depositor protection.This is seen as:

Historically, asset liquidity was the primary method by which banks met cash demands.

Why Are Financial Institutions Special

The Financial Service Industry: Depository Institutions

The Financial Service Industry: Other Financial Institutions

Risks 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

Managing Interest Rate Risk Using Securitisation

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 Risks

Capital Management and Adequacy

Filters