26 Questions
What does Asset Management aim at?
Maximizing the return for the commercial bank
What is the main goal of Liability Management?
Minimizing the cost for the commercial bank
What is the purpose of Liquidity Management?
Allowing the bank to pay off its liabilities in case of having a deposit outflow
Why can't the reserves be equal to zero according to Liquidity Management?
To allow the bank to pay off its liabilities in case of having a deposit outflow
What does the Central bank obligate banks to do in terms of liquidity management?
Keep part of their deposits in liquid money as required reserves
What is 'Excess Reserves' in liquidity management?
The additional amount of liquid money kept by the commercial bank
What is the formula for Excess Reserves (ER) in a bank?
ER = excess reserve ratio (rE) * Deposits (D)
What is the purpose of liquidity management in a bank?
To manage the reserves optimally
How can a bank cover a liquidity shortage if actual reserves are lower than the required reserves?
Selling securities
What happens if a bank borrows from the Central Bank to cover a liquidity shortage?
The bank would pay the discount rate
What is the formula for Total Reserves (R) in a bank?
R = Required Reserves + Excess Reserves
What does the excess reserve ratio refer to in a bank?
The optional ratio that could differ from one commercial bank to another
What is the function of financial markets?
To channel funds from households, firms, and governments with surplus funds to those with a shortage of funds
What are securities in the context of financial markets?
Claims on the future income or assets of the borrower
How is direct finance conducted in the financial markets?
By trading securities (financial instruments)
What is the classification of financial markets based on debt and equity?
Debt Vs. Equity Markets
In indirect finance, how are funds transferred in financial markets?
Via financial intermediaries
What are debt instruments and equity in the context of obtaining funds in a financial market?
Ways for a firm or an individual to obtain funds
Which type of securities are considered long-term and have no maturity date?
Equities
In which market are only short-term debt instruments traded?
Money market
What does an investment bank do in the primary market?
Guarantees a price for a corporation's securities
Which market is known for smaller fluctuations in prices, making it safer for investments?
Money market
Where do buyers and sellers of securities meet in one central location to conduct trades?
Organized exchange
Which type of security represents a claim to share in the net income and profits of a business?
Equities
What is the maturity range for intermediate-term securities?
Between one and ten years
In which market are longer-term debt and equity instruments traded?
Capital market
This quiz covers the four main types of financial management for commercial banks: Assets Management, Liability Management, Liquidity Management, and Capital Adequacy Management. It includes questions related to the aims and objectives of each type of financial management.
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