StuDocu is not sponsored or endorsed by any college or university CH15 (Testbank) Bank Management (Western Sydney University) Downloaded by Hoan My Phan (
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Chapter 15 - Testbank Student: ___________________________________________________________________________ 1. A deep market is defined as a market in which: A. low volumes of a particular security are traded. B. large volumes of a particular security are traded. C. low-priced securities are traded. D. high-priced securities are traded. 2. Which of the following are characteristics of a liquid asset? A. The asset can be turned into cash quickly. B. Turning the asset into cash will result in low transaction costs. C. Turning the asset into cash will result in little or no loss in principal value. D. All of the listed options are correct. 3. Which of the following statements is true? A. Liquid assets pay high interest rates. B. Liquid assets bear low default risk. C. Holding a high proportion of funds in liquid assets will result in increased profitability. D. All of the listed options are correct. 4. Which of the following statements is true? A. FIs are required to hold some liquid assets to lessen the threat of insolvency. B. FIs are required to hold some liquid assets for the purpose of monetary policy. C. FIs are required to hold some liquid assets for the purpose of taxation implications. D. FIs are required to hold some liquid assets to lessen the threat of insolvency, for the purpose of monetary policy and for the purpose of taxation implications. 5. Reserve requirement tax is defined as: A. The cost of holding reserves when the central bank pays no—or below market—interest on these balances. B. The benefits of holding reserves when the central bank pays above market interest on these balances. C. The tax paid on liquidating near-cash assets. D. The tax benefit received from liquidating near-cash assets. 6. Liquid asset ratio describes: 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. Downloaded by Hoan My Phan (
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7. Which of the following statements relating to required stable funding is true? 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. 8. Which of the following statements is true? A. All banks are required to comply with the liquidity coverage ratio by 2015 and will need to hold high-quality liquefiable assets that can be converted to cash to meet liquidity needs for 5 days. B. All banks are required to comply with the liquidity coverage ratio by 2015 and will need to hold high-quality liquefiable assets that can be converted to cash to meet liquidity needs for 30 days. C. Large banks are required to comply with the liquidity coverage ratio by 2015 and will need to hold high-quality liquefiable assets that can be converted to cash to meet liquidity needs for 30 days, whereas small banks will only need to meet liquidity needs for 5 days. D. These days only small banks are subject to the liquidity requirement. 9. Which of the following statements is true? A. In the current situation, only small FIs have to hold 9 per cent 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 per cent of their liabilities in specified high-quality liquefiable assets. 10. Which of the following statements is true? A. The stock of liquid assets held in an FI's balance sheet will depend on the FI's willingness to trade off liquidity against returns and on its ability to use purchased liquidity. B. The stock of liquid assets held in an FI's balance sheet will depend on the FI's willingness to trade off liquidity against returns but not on its ability to use purchased liquidity. C. The stock of liquid assets held in an FI's balance sheet will not depend on the FI's willingness to trade off liquidity against returns, it will depend, however, on its ability to use purchased liquidity. D. The stock of liquid assets held in an FI's balance sheet will neither depend on the FI's willingness to trade off liquidity against returns, nor on its ability to use purchased liquidity. 11. Potential sources of liquidity include investment in: A. housing loans. B. new equipment. C. short-term securities such as treasury notes and bank accepted bills. D. housing loans and investment in bank accepted bills. 12. Which of the following items are sources of stored liquidity? A. interbank market loans B. large certificates of deposits C. interbank market for exchange settlement funds D. semi-government securities Downloaded by Hoan My Phan (
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13. Which of the following statements is true? A. Bank accepted bills classify as purchased liquidity. B. Loans to short-term money market dealers classify as purchased liquidity. C. Securities sold under agreements to repurchase classify as stored liquidity. D. Certificates of deposits classify as stored liquidity. 14. What does 'constrained optimisation' in the context of liquidity management refer to? A. It refers to the case that any liquid asset holdings over and above the reserve requirements imposed by regulators need to be balanced by the same amount of short-term liabilities. B. It refers to the case that any increases in an FI's current liability holdings incur a decrease in the profitability of the FI's liquidity holdings. C. It refers to the case that any liquid asset reserve requirements imposed by regulators set a minimum bound on the level of liquid reserve assets in the balance sheet. D. It refers to the case that any liquid asset reserve requirements imposed by regulators need to be balanced by the same amount of short-term liabilities. 15. Which of the following statements is true? A. Australian FIs are required to hold a minimum of three days' estimated cash requirements to enable them to manage a short run on deposits. B. Australian FIs are required to hold a minimum of five days' estimated cash requirements to enable them to manage a short run on deposits. C. Australian FIs are required to hold a minimum of seven days' estimated cash requirements to enable them to manage a short run on deposits. D. None of the listed options are correct. 16. Which of the following are determinants of an FI's optimal liquidity? A. The variability of deposit inflows and outflows. B. The yield on liquid assets. C. The acquisition costs of highly non-liquid assets. D. All of the listed options are correct. 17. Which of the following statements is true? 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. 18. The supervision of FI's liquidity management is undertaken by the: A. ASIC. B. RBA. C. APRA. D. ACCC. Downloaded by Hoan My Phan (
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