How do banks manage liquidity risk? ( Check all that apply. ) A. Banks manage th

ID: 2813433 • Letter: H

Question

How do banks manage liquidity risk?

(Check

all that

apply.)

Banks manage this risk by keeping some funds very liquid, such as a reverse repurchase agreement.

Banks can increase their assets to cover liquidity risk.

Banks can increase their borrowings to cover liquidity risk.

Banks manage this risk by keeping some funds very liquid, such as in the federal funds market.

How do banks manage credit risk?

Banks can manage credit risk by diversifying their assets.

Banks can manage credit risk by performing credit risk analysis, requiring borrowers to put up collateral, and using credit rationing.

Banks can manage risk by creating long-term business relationships by which the bank could acquire information about the creditor.

All of the above are correct.

How do banks manage interest-rate risk?

(Check

all that

apply.)

Banks can manage interest-rate risk by keeping some funds as repurchase agreements.

Banks can increase their borrowings to manage interest-rate risk.

Interest-rate swaps can reduce interest-rate risk exposure.

Banks can reduce interest-rate risk by making more floating rate loans, or ARMs.

Answer (1) :- The correct answer is (D)

banks manage liquidity risk by keeping some funds very liquid, such as a reverse repurchase agreement.

Answer (2) :- The correct answer is (D) that is All the above

Answer (3) :- the correct answer is (C)

Interest-rate swaps can reduce interest-rate risk exposure.

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