QUESTION 18

1. Which of the following is NOT a potential cause of liquidity risk for a bank?

   	A.	A decrease in asset prices of securities held in the investment portfolio.
   	B.	A decrease in the availability of short-term borrowed funds.
   	C.	An increase in requests by depositors to withdrawal large amounts of deposits.
   	D.	An increase in requests to fund large amounts of loan commitments.
   	E.	A decrease in the bank's stock price caused by market factors.

2. QUESTION 20

3. Which of the following statements is FALSE?

   	A.	Matching the maturities of assets and liabilities supports the asset transformation function of FIs.
   	B.	Firm-specific credit risk can be reduced by diversification.
   	C.	If an FI holds long-term assets funded by short-term liabilities when interest rates rise, the market value of assets will fall by a greater amount than the market value of its liabilities.
   	D.	Unanticipated withdrawals by liability holders are a major part of liquidity risk.
   	E.	An FI is short-funded when the maturity of its liabilities is less than the maturity of its assets.

4. 1 points

   QUESTION 21

5. Which of the following statements is FALSE?

   	A.	Liquidity risk is a normal aspect of everyday management of an FI.
   	B.	Purchased liquidity management carries the potential risk of significant increases in the cost of funds during periods of high interest rate volatility.
   	C.	Managing asset-side liquidity risk can involve either purchased liquidity management or stored liquidity management.
   	D.	The greater the difference between fair market prices and fire-sale prices for assets, the less liquid the an FI's portfolio of assets.
   	E.	In the event of a bank run, depositor claims on the bank are satisfied on a pro rata basis.

Answer rating: 100% (QA)

QUESTION 18 the following is NOT a potential cause of liquidity risk E A decrease in the banks stock ... View the full answer