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| 1 | |
In March of 2008, the investment bank Bear Stearns faced a classic ___________, as its best customers fled, and short-term creditors refused to lend it more money. |
| | A) | management succession problem |
| | B) | loss of its top executives |
| | C) | run on the bank |
| | D) | investigation by the Justice Department |
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| 2 | |
In March of 2008, the Federal Reserve responded to a "liquidity crunch" by announcing it would _____________ commercial and investment banks, in return for an equivalent amount of mortgage-backed securities. |
| | A) | short sell the stock of |
| | B) | buy the stock of |
| | C) | lend bank stocks to |
| | D) | lend Treasury securities to |
| | E) | buy real estate from |
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| 3 | |
The _______________ of a bank are those that exhibit a higher degree of stability from day to day. |
| | A) | discount window borrowing |
| | B) | federal funds purchases |
| | C) | repurchase agreements |
| | D) | core deposits |
| | E) | large, negotiable CDs |
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| 4 | |
Antonio National Bank is experiencing an unexpected and large number of requests for funds under existing loan commitments. This is the essence of: |
| | A) | asset side liquidity risk |
| | B) | credit risk |
| | C) | net deposit drain |
| | D) | liability side liquidity risk |
| | E) | c and d |
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| 5 | |
When a bank deals with deposit "drainage" by buying more fed funds or entering the repurchase agreement market, we say the bank is using: |
| | A) | long-term funding sources |
| | B) | core deposits |
| | C) | purchased liquidity |
| | D) | liquidation of assets |
| | E) | brokered deposits |
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| 6 | |
If a bank has to raise liquidity by selling off loans on short notice, the prices on such loan sales would be termed __________ prices. |
| | A) | fire-sale |
| | B) | maximum liquidity |
| | C) | deposit drain |
| | D) | face value |
| | E) | book value |
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| 7 | |
In the "liquidity index" measurement scheme, which of the following is/are true? |
| | A) | The index is higher if the bank's assets are more liquid. |
| | B) | The index is higher if the bank's assets are less liquid. |
| | C) | The index is higher if immediate asset liquidation requires lower prices. |
| | D) | (b) and (c) |
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| 8 | |
When a bank relies on a policy of "purchased liquidity," it will generally be: |
| | A) | using less financial leverage |
| | B) | using cheaper funds. |
| | C) | earning a lower return on its investments. |
| | D) | using more expensive funds. |
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| 9 | |
The stated, per-account limit on deposit insurance, provided by the FDIC, is: |
| | A) | $250,000 |
| | B) | $100,000 |
| | C) | $ 50,000 |
| | D) | $ 25,000 |
| | E) | $ 2,500 |
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| 10 | |
When a bank encounters a surge of depositors withdrawing their funds unexpectedly, we say the bank is experiencing a/an: |
| | A) | funding gap |
| | B) | bank surrender |
| | C) | bank run |
| | D) | excess liquidity position |
| | E) | fire sale |
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| 11 | |
For claims of life and property-casualty insurance companies, there: |
| | A) | is a federally-sponsored guarantee fund, administered by the FDIC |
| | B) | is a federally-sponsored guarantee fund, administered by the Federal Reserve |
| | C) | are guarantee funds, administered at the state level |
| | D) | are no guarantee arrangements at all |
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| 12 | |
The difference between a bank's average loans and its average deposits is called the: |
| | A) | financing gap |
| | B) | liquidity index |
| | C) | core deposit surplus |
| | D) | stored liquidity |
| | E) | purchased liquidity |
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| 13 | |
In February 2000, ______________ came up with a "Maturity Laddering" method for measuring liquidity risk. |
| | A) | the Federal Reserve |
| | B) | the FDIC |
| | C) | the Bank for International Settlements |
| | D) | the SEC |
| | E) | the U.S. Treasury |
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| 14 | |
Asset-side liquidity risk would be exemplified by which of the following? |
| | A) | unexpected loan requests |
| | B) | unexpected exercises of existing loan commitments |
| | C) | unexpected withdrawals of deposits |
| | D) | unexpected changes in demand for checking deposits |
| | E) | (a) and (b) |
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| 15 | |
If a bank prepares for its liquidity needs by holding more cash and/or marketable securities, it is using a/an _________________approach. |
| | A) | purchased liquidity |
| | B) | "hot money" |
| | C) | liquidity index |
| | D) | stored liquidity |
| | E) | (a) and (b) |
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| 16 | |
A bank with a higher ratio of "borrowed funds to total assets" would generally be: |
| | A) | relying more on core deposits |
| | B) | relying less on core deposits |
| | C) | employing less financial leverage |
| | D) | investing more in municipal securities |
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| 17 | |
If bank customers lose faith in the banking system, resulting in a "contagion" of bank runs, we would term this a: |
| | A) | funding gap |
| | B) | financing gap |
| | C) | bank insolvency |
| | D) | bank panic |
| | E) | fiscal disturbance |
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| 18 | |
After the terrorist attacks of September 11, 2001, the Federal Reserve responded by: |
| | A) | making funds available through its discount window. |
| | B) | closing all Federal Reserve Banks for two consecutive days. |
| | C) | suspending all open market operations for the remainder of the month. |
| | D) | closing the discount window for two consecutive days. |
| | E) | closing the Federal Reserve Bank of New York for the remainder of the month. |
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| 19 | |
In 2003, the Federal Reserve changed its discount window lending procedures. There are now three credit programs offered through the discount window: primary, secondary, and _____________. |
| | A) | insured-bank |
| | B) | disaster relief |
| | C) | seasonal |
| | D) | non-depository |
| | E) | international |
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