11.
Asset-side liquidity risk would be exemplified by which of the following?
unexpected loan requests
unexpected exercise of existing loan commitments
unexpected withdrawals of deposits
unexpected changes in demand for checking deposits
a and b only.
11. Asset-side liquidity risk would be exemplified by which of the following? unexpected loan requests unexpected...
6. Liquidity risk Which of the following are sources of liquidity risk? Check all that apply. An unexpected increase in the demand for loans An unexpected decrease in withdrawals by depositors An unexpected increase in withdrawals by depositors An unexpected increase in the market value of liabilities Which of the following are potential solutions to the liquidity problem? Check all that apply. Raising cash by selling Treasury bills and commercial paper Borrowing from the Federal Reserve Raising cash by issuing...
Q1.Which one of the following statements is not true? a. Asset-side risk arises from transactions that result in a transfer of cash to some other asset, such as the exercise of a loan commitment or a line of credit b. Liability-side risk arises from transactions whereby shareholders of the financial institution claim cash returns on their equity Investments c. Liquidity risk occurs because of situations that develop from economic and financial transactions d. Liquidity risk is reflected on either the...
Which of the following statements regarding liquidity risk in correct? Explain why Asset liquidity risk arises when a financial institution cannot meet payment obligations. Flight to quality is usually reflected in a decrease in the yield spread between corporate and government debt issuances. Yield spread between on-the-run and off-the-run securities mainly captures the liquidity premium. Funding liquidity risk can be managed by setting limits on certain asset markets or products and by means of diversification.
54. Risk-based capital ratios measures are associated with which of the following bank risks? a. interest rate risk b. liquidity risk c. credit risk d. reinvestment risk 55. A match funding of a commercial loan with a large CD is an example of a. a macrohedge b. a microhedge c. increased interest rate risk d. short position 56. The major sources of bank liquidity are and ; the major uses are and...
Which of the following is not true of liquidity or marketability risk or discount? It is measurable. It is believed to have declined in recent years The magnitude of the discount or risk is inversely related to the size of the investor’s equity ownership in the business. The magnitude of the discount or risk is directly related to the size of the investor’s equity ownership in the business. It is important to adjust the discount rate for liquidity risk. Corporate...
8.) Derived demand is exemplified in which of the following? a.) The salary of computer techs rise, resulting in a decrease in supply and an increase in demand. b.) The salary of computer techs fall, resulting in an increase in supply and a decrease in demand. c.) Consumers want computers, so producers raise the price of computers. d.) Consumers want faster computers, so technology firms invest in capital and labor. e.) None of the above 9.) Demand for capital a.)...
4.Which of the following statements is (are) correct?(x)A 2-year Treasury security has a higher liquidity risk premium than a 2-year corporate bond because the current White House administration is in the process of melting down (liquifying).(y)AAA corporate bonds have a lower interest rate than BBB corporate bonds because the default risk premium is higher on a BBB corporate bond than a AAA corporate bond.(z)The higher the default risk, the higher the interest rate that security buyers will demand. A.(x), (y)...
Which of the following would have the highest liquidity risk? A Treasury bill. A 50 foot yacht. A 30 year AAA rated Bond with 5 years remaining until maturity. 60 day Fed Funds.
Which of the following would increase the risk of a loan to the lender? Multiple Choice Inflation rate greater than loan rate A short time to maturity o Consumer Price Index o o Rule of 72 Rule or 72 o Inflation rate lower than loan rate o
Which of the following is not a risk factor for asset misappropriation? a. Large amount of cash on hand b. Company enforce mandatory vacation c. Small, high value, or high demand inventory items d. Promotion or compensation inconsistent with expectations