Which one of the following is NOT true for liquidity risk?

• A) Liquidity risk may arise if the immediate funds are needed for off-balance sheet activities.
• B) A bank with positive net worth (assets exceed its liabilities) may face liquidity risk.
• C) Off –balance sheet activities have no effect on liquidity risk
• D) Liquidity risk can arise when depositors unexpectedly withdraw deposit balances

Primary assets and liabilities of financial intermediaries are ----

• A) Real assets
• B) Financial instrument or real assets
• C) Financial instruments
• D) None of above

Which of the following costs are reduced by financial intermediaries?

• A) Transaction cost and Information cost
• B) Transaction cost and product cost
• C) Information cost and conversion cost
• D) Transaction cost and hidden cost

Which of the following practice is NOT used to manage foreign exchange risk?

• A) Attract deposits and make loans in the same currency
• B) Do business only in a particular country
• C) Use foreign exchange swaps
• D) Use foreign exchange futures

One argument for an independent central bank is:

• A) Politicians have a long-run focus that is not well tuned to addressing economic problems
• B) Without independence competent people would not take a position in a central bank
• C) Central bankers have a short run focus that usually corrects problems faster
• D) Successful monetary policy requires a long time horizon usually well beyond the next election of most public officials

The theory of efficient market states that prices of financial instruments reflect:

• A) Imperfect information
• B) No information
• C) Some of the information
• D) All available information

There are _________ type/s of life insurance.

• A) 3
• B) 2
• C) 1
• D) 4

If a bank is holding its liabilities on floating rate and assets on fixed rate of interest, as a result ---------------------- risk may arise.

• A) Credit
• B) Default
• C) Interest rate
• D) Liquidity

---------- is considered private information?

• A) In-depth knowledge about the investment of company
• B) The dividend history reveal by the financial statement of company
• C) Liquidity position reveal by cash flow statement
• D) Knowledge about the dividend percentage before the announcement of dividend declaration

If the risk free rate increases in calculating the present value of stock and other parameter remains unchanged, the price of equity will -------

• A) No effect
• B) Decrease
• C) May increase or decrease
• D) Increase

Which one the following is NOT the way to manage liquidity risk?

• A) By adjusting liabilities
• B) Through diversification
• C) By adjusting assets
• D) By holding sufficient excess reserves

Adverse selection occurs ------ and Moral hazard occurs ---------

• A) After a transaction, Before a transaction
• B) In financial market, In real market
• C) Before a transaction, After a transaction
• D) In real market, In financial market

___________ include savings and time deposits and account for nearly two-thirds of all commercial bank liabilities.

• A) Non transactions Deposits
• B) Borrowings
• C) Checkable Deposits
• D) Discount loans

Combination of term life insurance and a savings account is called as __________.

• A) Term life insurance
• B) Whole life insurance
• C) None of the given option
• D) Group life insurance

Which kind of stock valuation approach is mainly focus on psychology of investor?

• A) None of above
• B) Behaviorist approach
• C) Chartist approach
• D) Fundamentalist approach

Which of the following stock valuation method focus the company’s financial report and different ratios to estimate stock price?

• A) Fundamentalist
• B) Behaviorist
• C) Chartist
• D) Value at risk (VAR)

Interest rate risk arises as a result of which one of the following situation?

• A) It arises because of sudden demands of funds
• B) It arises when two sides of the balance sheet do not match up
• C) It arises when loan is not repaid
• D) It arises when banks make additional profit by using derivatives

All of the following functions are performed by financial intermediaries Except:

• A) Financial intermediaries diversify the risk
• B) Financial intermediaries reduce transaction cost
• C) Financial intermediaries provide access to payment system
• D) Financial intermediaries pool the resources of only big saver

When companies use more leverage at a particular time, standard deviation increases and return on equity --------

• A) Decreases
• B) Constant
• C) None of Above
• D) Increases

Which of the following is considered like a bond issued by commercial bank, with certain maturity and specific interest rate?

• A) Perpetual bond
• B) Treasury bill
• C) Certificate of deposit
• D) Checkable deposits