Reference no: EM132608775

Question 1: Which of the following statements about recently adopted guidelines covering capital requirements for market risk that banks are required to perform is false?

Select one:

a. Banks use a risk measurement model based on a VaR approach.

b. Banks estimate the sensitivity of portfolio components to small changes in prices.

c. Banks hold a fixed allocation of funds between various balance sheet assets and off-balance-sheet business.

d. Banks must hold capital against risk of loss from changes in interest rates.

Question 2: Off-balance-sheet business for a bank refers to

Select one:

a. transactions that are currently only a contingent liability.

b. deposits and loans longer than one year.

c. call deposits that may be withdrawn on demand.

d. consumer loans that are in default.

Question 3: Which of the following about a bank's activities is incorrect?

Select one:

a. A bank's loans are its assets.

b. Off-balance-sheet business items are contingent liabilities.

c. Banks typically have high credit ratings.

d. Liability management is the management of a bank's loans.

Question 4: Which of the following statements about bill acceptance facilities is incorrect?

Select one:

a. If interest rates change before a bank bill matures, the bank can change the interest rate on it.

b. When a bank acts as an acceptor it will pay the face value of the bill to the holder at maturity.

c. When a bank discounts a bill for the issuer, it buys it.

d. When a bank that holds a bill rediscounts it the bank onsells it.

Question 5: With regard to bank bills, the bill is sold at a discount:

Select one:

a. because the face value is the only payment to the holder.

b. because the bank needs to find a buyer.

c. to encourage buyers.

d. because the bank pays the face value of the funds to the borrower at maturity.