Banking and Financial Institutions Balance Sheet Quiz
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Questions and Answers

What is the primary purpose of liquidity management for a bank?

  • To maximize profits from loans
  • To ensure ability to meet short-term obligations (correct)
  • To maintain high levels of excess reserves
  • To minimize credit risk exposure

    • What are the main components of a bank's balance sheet?

  • Assets and liabilities (correct)
  • Cash items and bank capital
  • Reserves and securities
  • Deposits and loans

    • How does ample excess reserves affect a bank's response to a deposit outflow?

  • No changes in other parts of the balance sheet are necessitated (correct)
  • It leads to an immediate decrease in loans to compensate
  • It prompts the sale of securities to cover the outflow
  • It requires an increase in bank capital to maintain stability

    • What is the purpose of bank capital?

    <p>To absorb potential losses and provide a cushion against insolvency</p> Signup and view all the answers

    In the context of banking, what does asset management primarily involve?

    <p>Optimizing the composition of assets to maximize returns and minimize risk</p> Signup and view all the answers

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