Chap 3 p2

Which of the following is NOT a feature of liability management?

• Flexibility in fund allocation

• Interest-sensitive fund acquisition

• Focus solely on equity reserves

• Use of price as a control mechanism

Federal funds loans are usually:

• Long-term investments

• Collateralized by securities

• Returned within 24 hours

• Restricted to government agencies

Why are repurchase agreements considered less risky than federal funds?

• They are backed by high-quality securities

• They have lower interest rates

• They involve longer maturity periods

• They are issued by central banks

Which of the following is a key feature of Eurocurrency deposits?

• Primarily used for domestic transactions

• Denominated in local currency

• Traded in large denominations

• Held in short-term savings accounts

Negotiable CDs are considered hybrid accounts because:

• They pay variable interest rates

• They combine bonds and stocks

• They are issued by savings institutions

• They serve as both deposits and IOUs

What distinguishes structured repurchase agreements from normal repos?

• They are unsecured

• They include embedded options

• They are issued for longer terms

• They avoid interest rate fluctuations

Seasonal credit from the Federal Reserve is designed to:

• Support banks with liquidity crises

• Help small banks manage seasonal fluctuations

• Replace primary credit loans

• Address systemic economic risks

Green Valley Bank seeks funds to meet a $50 million liquidity gap. Which source is most suitable for immediate access?

• Federal funds market

• Long-term debentures

• Eurocurrency deposits

• Seasonal credit

Why might a bank choose Eurocurrency deposits as a funding source?

• They are interest-free

• They offer tax advantages

• They have high liquidity risks

• They are exempt from reserve requirements

What is the primary purpose of a callable repo?

• To ensure fixed returns over a set maturity

• To allow early termination of the agreement

• To avoid collateral requirements

• To lock in high interest rates