Question 1

Potential sources of liquidity include investment in:

Accepted Answer

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 billsE) None of the above
F) A) and D)

Question 2

Basel III liquidity reforms costs are:

Accepted Answer

A)  reduced profitability due to more liquid balance sheets
B)  reduced impact of the liquidity coverage ratio and net stable funding ratio on credit unions and building societies
C)  competitiveness of Australian banks will be negatively impacted if other countries do not take up the reforms
D)  All of the listed options are correct.E) B) and C)
F) None of the above

Question 3

Although Australia has only had an explicit deposit insurance scheme since 2008, it has had depositor protection since 1959 and has always had depositor preference.

Accepted Answer

A) True 
 B)False

Question 4

NCDs are short-term, fixed-term deposits and are known as wholesale CDs, which have a face value of below $100 000.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is true?

Accepted Answer

A)  Treasury Bonds are short-term instruments.
B)  Corporate promissory notes are long-term instruments.
C)  Corporate bonds are long-term instruments.
D)  Semi-government bonds are short-term instrumentsE) None of the above
F) A) and C)

Question 6

APS210 specifies that 'high-quality liquid assets' must be free from encumbrances and include:

Accepted Answer

A)  cash
B)  long-term loans
C)  cash and eligible securities approved by APRA
D)  cash and long-term loansE) C) and D)
F) None of the above

Question 7

Which of the following are characteristics of a liquid asset?

Accepted Answer

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.E) All of the above
F) C) and D)

Question 8

Which of the following statements is true?

Accepted Answer

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.E) A) and B)
F) B) and D)

Question 9

All of the following are associated with contagious runs except:

Accepted Answer

A)  liability holders not distinguishing between good and bad FIs
B)  liability holders seeking to quickly turn their liabilities into cash or safe securities
C)  a contractionary effect on the supply of credit and negative social welfare effects
D)  an expansionary effect on the money supplyE) A) and D)
F) B) and D)

Question 10

Which of the following statements is true?

Accepted Answer

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.E) All of the above
F) A) and B)

Question 11

Which of the following statements is true?

Accepted Answer

A)  Going-concern scenario refers to abnormal behaviour of cash flows in the course of business.
B)  Going-concern scenario focuses on the bank's liquidity policy in a worst-case scenario.
C)  Going-concern scenario focuses on the bank's day-to-day liquidity management.
D)  None of the listed options are correct.E) C) and D)
F) A) and C)

Question 12

Which of the following are the two main sources of exchange settlement liquidity for Australian FIs provided by RBA repos?

Accepted Answer

A)  ESAs and intra-day repurchase agreement facilities.
B)  Inter-day repurchase agreement facilities and overnight repurchase agreement facilities.
C)  ESAs and inter-day repurchase agreement facilities.
D)  Intra-day repurchase agreement facilities and overnight repurchase agreement facilities.E) B) and C)
F) B) and D)

Question 13

Secondary or buffer reserves are:

Accepted Answer

A)  non-reserve assets that can be quickly turned into cash or used to provide collateral for repurchase agreements and other bank borrowing
B)  illiquid securities
C)  used to pay dividends
D)  All of the listed options are correct.E) A) and B)
F) A) and C)

Question 14

Which of the following are determinants of an FI's optimal liquidity?

Accepted Answer

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.E) A) and B)
F) B) and C)

Question 15

The gross interest return is calculated as explicit interest less implicit interest.

Accepted Answer

A) True 
 B)False

Question 16

Because retail CDs have fixed maturities, FI managers always should have perfect information regarding the scheduling of interest and principal payments.

Accepted Answer

A) True 
 B)False

Question 17

Subordinated debt is debt that is either unsecured or has a lower priority than that of another debt claim on the same asset or property; also called junior debt

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements is true?

Accepted Answer

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.E) B) and C)
F) A) and B)

Question 19

Regulators seek to provide depositor protection to depositors than other FI creditors because deposits are:

Accepted Answer

A)  a critical part of the financial system as they facilitate economic transactions
B)  the main source of funding for banks
C)  the primary form of savings for individuals and loss of deposits causes significant hardship for depositors
D)  All of the listed options are correct.E) None of the above
F) A) and B)

Question 20

Reserve requirement tax is defined as:

Accepted Answer

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 assetsE) None of the above
F) A) and D)

Exam 15: Liability and Liquidity Management

Potential sources of liquidity include investment in:

Correct AnswerverifiedShow Answer

Which of the following are the two main sources of exchange settlement liquidity for Australian FIs provided by RBA repos?

Correct AnswerverifiedShow Answer

Which of the following statements is true?

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Reserve requirement tax is defined as:

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Regulators seek to provide depositor protection to depositors than other FI creditors because deposits are:

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Which of the following are characteristics of a liquid asset?

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Which of the following statements is true?

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Secondary or buffer reserves are:

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NCDs are short-term, fixed-term deposits and are known as wholesale CDs, which have a face value of below $100 000.

Correct AnswerverifiedShow Answer

Which of the following are determinants of an FI's optimal liquidity?

Correct AnswerverifiedShow Answer

Because retail CDs have fixed maturities, FI managers always should have perfect information regarding the scheduling of interest and principal payments.

Correct AnswerverifiedShow Answer

All of the following are associated with contagious runs except:

Correct AnswerverifiedShow Answer

Basel III liquidity reforms costs are:

Correct AnswerverifiedShow Answer

The gross interest return is calculated as explicit interest less implicit interest.

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

APS210 specifies that 'high-quality liquid assets' must be free from encumbrances and include:

Correct AnswerverifiedShow Answer

Subordinated debt is debt that is either unsecured or has a lower priority than that of another debt claim on the same asset or property; also called junior debt

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Although Australia has only had an explicit deposit insurance scheme since 2008, it has had depositor protection since 1959 and has always had depositor preference.

Correct AnswerverifiedShow Answer

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