Part 1 Sec A
1. Integrating Asset and Liability Management
What is accomplished when a bank integrates its liability management with its asset management?
a.It can improve by making it better by improving performance
2. Liquidity
Given the liquidity advantage of holding Treasury bills, why do banks hold only a relatively small portion of their assets as T-bills?
a.Because the Treasury bill yields in some cases may be lower than it is for a bank to obtain funds.
3. Illiquidity
How do banks resolve illiquidity problems?
a.Banks resolve illiquidity when they sell assets to obtain funds, or borrowing fundswith federal funds market or from the discount window.
4. Managing Interest Rate Risk
If a bank expects interest rates to decrease over time, howmight it alter the rate sensitivity of its assets and liabilities?
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