Question 1

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

Accepted Answer

The answer of If total legal reserves held are greater...

Question 2

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.

Accepted Answer

The answer of Under a _________________________ strategy,some of the expected...

Question 3

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.

Accepted Answer

The answer of For several decades,the largest banks around the...

Question 4

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:

Accepted Answer

A) liability management. 
B) asset conversion. 
C) borrowed liquidity management. 
D) balanced liquidity management. 
E) None of the options is correct

Question 5

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?

Accepted Answer

A) Cash position indicator 
B) Liquid securities indicator 
C) Net federal funds and repurchase agreement position 
D) Capacity ratio 
E) Hot money ratio

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) Deposit composition ratio 
B) Liquid securities indicator 
C) Net federal funds and repurchase agreement position 
D) Capacity ratio 
E) None of the options is correct

Question 9

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.

Accepted Answer

The answer of A(n)__________________ is an asset which can be...

Question 10

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:

Accepted Answer

A) the sources and uses of funds approach. 
B) the structured funds approach. 
C) the liquidity indicator approach. 
D) signals from the market place. 
E) None of the options is correct.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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 ________________________.

Accepted Answer

The answer of The method used in the U.S.to determine...

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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?

Accepted Answer

A) $880 million liquidity surplus 
B) $440 million liquidity deficit 
C) $440 million liquidity surplus 
D) $880 million liquidity deficit 
E) None of the options is correct

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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?

Accepted Answer

A) $90 million 
B) $81 million 
C) $70 million 
D) $20 million 
E) None of the options is correct

Question 20

The Fed funds market is most volatile on a bank:

Accepted Answer

A) computation day. 
B) settlement day. 
C) reserve day. 
D) maintenance day. 
E) holiday.

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.

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

The Fed funds market is most volatile on a bank: