Which of the following is NOT a potential cause of liquidity risk for a bank? A.A decrease in the availability of short-term borrowed funds.B.An increase in requests by depositors to withdrawal large amounts of deposits.C.A decrease in the bank's stock price caused by market factors.D.An increase in requests to fund large amounts of loan commitments.E.A decrease in asset prices of securities held in the investment portfolio.

Which of the following statements is TRUE?A.Bank runs occur because customers know that banks will be forced to liquidate assets at fire-sale prices.B.Asset side liquidity risk arises from transactions that result in a transfer of cash to some other asset, such as the exercise of a loan.C.An expected net deposit drain on any given day means that deposit withdrawals are less than deposit inflows. D.Mutual funds tend to have more exposure to liquidity risk than banks. E.In terms of liquidity risk measurement, the financing gap is defined as rate sensitive assets minus rate sensitive liabilities.

Which of the following situations can lead to a liquidity deficit? (multiple answers may be correct)Group of answer choicesAn investigative journalist highlights that your bank has poor liquidity managementYou have large credit commitments exclusively to firms with highly volatile cashflows. These firms are now hit with a negative shock.Your shareholders request that 90% of this year's profit is distributed in the form of dividends.The value of your trading portfolio value drops by 30%.The value of your investment portfolio value drops by 30%

As commercial banks move from their traditional banking activities of deposit taking and lending and shift more of their activities to trading, they are more subject to A.political risk.B.market risk.C.credit risk.D.sovereign risk.E.liquidity risk.

Which of the following statements describes a liquidity risk? Select one: a. Uncertain amount and timing of cash demands and cash sources. b. The uncertain impact of foreign currency exchange rates on the value of a transaction (eg. contract to buy or sell). c. The uncertain impact of commodity prices on the value of a transaction (eg. contract to buy or sell). d. Uncertainty in the value of a business caused by changes in market variables.

If liquidity requirements increase, what is likely to happen to this interest rate margin and bank risk? A Interest rate margin decreases, bank risk increases B Interest rate margin remains unchanged, bank risk decreases Interest rate margin increases, bank risk increases D Interest rate margin decreases, bank risk decreases