True/False (8 questions, you pt. each, 8 pts. )
Enter if the sentence or statement is valid (enter " A” on your own clicker) or perhaps false ( " B”).
1 . Suppose that Congress were to demand that defined-benefit pension plan funds use a lower rate of interest to calculate the PHOTO VOLTAIC of their expected future debts. This lower discount factor would make pension funds look more insolvent. To
2 . Life insurance coverage companies typically have greater fluidity risk than property-casualty insurance companies.
3. Bank regulators can easily discourage meaningful hazard by requiring banks to maintain increased capital amounts.
some. Securitization permits mortgages to become financed simply by outside investors--who now make mortgage interest income--instead of traditional lenders. Lending institutions include therefore not really welcomed the increased securitization of mortgage loans.
five. Liability-side fluidity risk might be a result of OBS lending obligations.
6. In the U. S i9000., cash reserves needed to meet pay in reserve requirements typically consist of U. S i9000. government a genuine such as U. S. Treasury Bills, burial container cash and cash deposit at the Federal government Reserve Financial institution.
7. Demand deposits are a low-cost, but not costless, source of funds and also have a high degree of withdrawal risk.
8. Reveal deposits for credit unions are covered by the FDIC.
Multiple Choice (9 questions, 2 pts. each, except exactly where noted, twenty-two pts. total) Identify the letter with the choice that best wraps up the statement or answers the question. Or perhaps choose the response closest (i. e. provides the minimum big difference in overall value) to your answer.
being unfaithful. (3 pts. ) Subordinated debt (SD) has been suggested as a means of accelerating the degree of overall market discipline at a depository institution (DI). Which will of the pursuing objectives will certainly SD support achieve? a. The expected cost of giving SD should certainly decrease because the risk of the DI elevated. d. Supplementary market produces on the SD would be inversely related to an increase in the risk of the DI. n. Mandatory SECURE DIGITAL would reduce transparency for DIs. elizabeth. Issuing SD might decrease the risk of DALAM insolvency. c. SD could further focus on the use of capital forbearance.
twelve. The prophylaxie effect
a. occurs when liquidity risk problems in bad banks damages efficient banks. c. results the moment interest rate risk exacerbates credit risk and liquidity risk exposures. w. is eradicated by government insurance against bank works. d. stems from the positive relationship in FI returns.
10. (3 pts. ) What is the average implied interest rate (IIR) on a $15, 000 bank account if the bank's average managing costs will be $200 and annual service fees average $75? a. several. 0% < IIR < 4. 0%d. 2 . 0% < IIR < several. 0%
n. 0. 0% < IIR < 1 ) 0%e. four. 0% < IIR
c. 1 ) 0% < IIR < 2 . 0%
12. The process of encouraging owners to be more proficient of the risk profile of the DI should be to encourage more a. depositor disciplined. stockholder discipline
n. regulator disciplinee. moral danger
c. corporate compliance
13. Which of the subsequent is not accomplished by advantage securitization? a. Increases the fluidity of assetsd. Decreases the duration of property b. Provides a new method to obtain fundse. Lessens the costs of regulation c. Increases the costs of monitoring
14. Which usually of the pursuing is not just a primary source of liquidity? a. Excess cash reserves over and above regulatory reserve requirements. d. Capital notes and other long-term funding alternatives b. Borrowings inside the money/purchased funds markete. Cash-type assets that may be sold with little value risk and low deal costs. c. Fed money borrowed
15. (3 pts. ) Necessitating minimum reserves to be kept at the central bank is the equivalent of your. mandating buffer reserves. g. promoting the contagious effects of liquidity risk. b. a reserve necessity tax. e. none of the above.
c. mandating target hold ratio.
16. Maintenance a pass-through security (e. g. a mortgage-backed protection, MBS) identifies a. an FI digesting...