true or false

1. The spread effect is the effect that a change in the spread between rates on RSAs and RSLs has on net interest income as interest rates change.

Select one:

True

False

2. Bank A Asset Bank B Assets

Cash $20 Cash $20

Treasury securities 50 Consumer loans 60

Commercial loans 100 Commercial loans 90

Total assets $170 Total assets $170

Bank B is more Liquid.

Select one:

True

False

3. The maturity bucket is the time window over which the dollar amounts of assets and liabilities are measured.

Select one:

True

False

4. The CGAP effect describes the relations between changes in interest rates and changes in net interest income. According to the CGAP effect, when CGAP is positive the change in NII is positively related to the change in interest rates.

Select one:

True

False

5. Treasury securities are considered good examples of liquid assets because they can be converted into cash quickly with very little loss of value from current market levels.

Select one:

True

False

6. "Basel III" is a comprehensive set of reform measures aimed at strengthening banks' transparency and disclosures.

Select one:

True

False

7. The repricing gap is a measure of the difference between the dollar value of assets that will reprice and the dollar value of liabilities that will reprice within a specific time period, where repricing can be the result of a roll over of an asset or liability.

Select one:

True

False

8. Increase in capital adequacy requirement will not be able to absorb loan losses.

Select one:

True

False

9. An advantage of Contingent claim valuation is that it captures the specific characteristics of banking better than any other approach.

Select one:

True

False

10. FIs taking conservative positions by holding large amounts of liquid assets will therefore have higher profits.

Select one:

True

False