In the Shadow Banking Version #2, Securitization with Asset-Backed Commercial Papers (ABCP), which of the following statements is correct? A. The bank bears the liquidity risk of the initial $100 bond portfolio. B. The money market mutual fund bears the liquidity risk of the initial bond portfolio. C. The liquidity guarantee that the bank issues will be reported on the liabilities side of its balance sheet. D. Both A and C are correct statements.

Refer to Bank Run Example above. Which of the following statements is correct? Select one: A. A bank with enough capital will unlikely face a panic run. B. Adverse selection problems emerge when deposit insurance lowers the panic-run risk and makes the banking sector more attractive to entities with lower financial ability. C. If Bank 1 is dependent on other fund sources (e.g. commercial papers, repo borrowing, etc.) rather than deposits, the bank will not face a panic run. D. If Bank 2 is dependent on other fund sources (e.g. commercial papers, repo borrowing, etc.) rather than deposits, the bank will not face a panic run. E. The panic run of depositors leads to the solvency problem of both Bank 1 and Bank 2. In the Shadow Banking, Version #1, Securitization with Repo Finance, which of the following statements is correct? Select one: A.The traditional bank has more liquidity but the amount of required capital is the same. B.The traditional bank will be insolvent if they have to write off the residual bond portfolio of $5. C.The traditional bank still bears the liquidity risk of the initial $100 bond portfolio. D.The traditional bank can make more loans after securitizing the initial $100 bond portfolio. In the Shadow Banking Version #2, Securitization with Asset-Backed Commercial Papers (ABCP), which of the following statements is correct? Select one: A. In a normal market condition, the liquidity guarantee can be found on the asset side of the money market mutual fund's balance sheet. B. Arrangements through ABCP allow banks to gain new liquidity but their capital is still constrained by the underlying assets in the ABCP. C. The traditional bank profits from the low interest rates on ABCP and the high interest rate on the loans that it originates. D. If off-balance-sheet items are fully accounted for in the capital requirement, ABCP will allow banks to increase their lending capacity.

In the Shadow Banking, Version #1, Securitization with Repo Finance, which of the following statements is correct? Select one: A.Liquidity risk stays with the traditional bank because it originated all loans in the portfolio. B.When the haircut ratio increases, the investment bank can cover its funding shortfall by issuing new equity shares to the market. C.If bonds in the AAA tranche default, the losses will first affect the capital of the traditional bank. D.Securitization is a part of the asset transformation process.

Refer to Bank Run Example above. Which of the following statements is correct? Select one: A.If deposit insurance is available, Bank 1 can survive and continue its operations. B.Higher reserve requirements can lower the probability of failures at both Bank 1 and Bank 2. C.Higher capital requirements lessen moral hazard problems because banks' shareholders will be affected more by losses in the banks' operations. D.Fire sales of bank assets are the least favorite solution to save a bank that is insolvent