Chapter 11

When selling securities to meet liquidity needs, a bank should consider all of the following except:

All of the above should be considered when selling securities to meet liquidity needs.

Which of the following is not considered a viable long-term source of bank liquidity?

Cash

Which of the following is not considered a monetary policy tool of the Federal Reserve?

Changing float requirements

Which of the following is a discretionary factor that will decrease a bank's daily reserves held at the Federal Reserve?

Currency received from Federal Reserve

Which of the following is a non-discretionary factor that will increase a bank's daily reserves held at the Federal Reserve?

Deposits from the U.S. Treasury

Which of the following is a discretionary factor that will increase a bank's daily reserves held at the Federal Reserve?

Federal funds purchased

Which of the following is not a measure of liability liquidity?

Federal funds sold to total assets

A bank is currently exactly meeting its reserve requirements of 10%. If the bank has a deposit inflow of $10,000,000, what is the impact on its required reserve position?

It now has excess reserves in the amount of $9,000,000.

Which of the following indicates the potential for deposits leaving a bank?

Large deposits held by a single customer

Which of the following indicates the potential demand for new loans?

Large, unused commercial credit lines outstanding

Which of the following is not an advantage of larger cash balances for a bank?

Larger cash balances reduce a bank's interest expense.

Which of the following is not considered a cash asset?

Marketable securities

Which of the following is a non-discretionary factor that will decrease a bank's daily reserves held at the Federal Reserve?

Remittances charged

Which of the following is not considered a highly liquid asset?

Repurchase agreement

In which of the following ways can a bank acquire liquidity?

Selling Treasury securities

Which of the following does not directly influence the amount of required reserves a bank must hold?

The dollar amount of money market deposit accounts outstanding.

Which of the following is not a reason that banks hold cash assets?

To meet capital requirements.

Which of the following is not a measure of liability liquidity?

Total loans to total assets

Collateral is required against each of the following liabilities except ________.

U.S. Treasury securities

Which of the following could be used to identify a potential increase in borrowing by customers that might deplete a bank's cash reserves?

Unused commercial credit lines outstanding

In determining reserves, the banks and the Federal Reserve currently use:

a lagged reserve accounting system.

Sweep accounts:

a. and c. only.

Correspondent banking services would include which of the following?

all of the above

The ease of converting an asset to cash with a minimum of loss is known as:

asset liquidity.

Volatile deposits:

equal the difference between actual current deposits and the base estimate of core deposits.

The check-clearing services of correspondent banks are often used because:

it often reduces float.

When increasing liabilities to meet liquidity needs, a bank should consider all of the following except:

lost interest income.

The two-week period during which a bank must hold sufficient legal reserves is called the:

maintenance period.

There is a short-run trade-off between a bank's liquidity and _______.

profitability

The section of a contingency plan that assesses the impact of potential adverse events on the bank's balance sheet is known as the _________ section?

quantitative