Bank Zilo has $2 million in cash and $10 million in loans coming due tomorrow with an expected default rate
of 1%. The proceeds will be deposited overnight. The bank owes $ 10 million on a securities purchase that
settles in two days and pays off $9 million in commercial paper in three days that is not expected to renew.
How much money should the bank plan to raise so as to avoid a liquidity problem?

• A.$710 million
• B.$650 million
• C.$700 million
• D.$712 million

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Which of the following statements defines Value-at-risk (VaR)?

• A.VaR is the maximum of past losses over a given period of time.
• B.VaR is the worst possible loss on a financial instrument or a portfolio of financial instruments over a
  given time period.
• C.VaR is the maximum likely loss on a financial instrument or a portfolio of financial instruments over a
  given time period with a given degree of probabilistic confidence.
• D.VaR is the minimum likely loss on a financial instrument or a portfolio of financial instruments with a
  given degree of probabilistic confidence.

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In the United States, stock investors must comply with the Regulation T of the Federal Reserve Bank and may
borrow up to ___ of the value of the securities from their brokers.

• A.40%
• B.60%
• C.30%
• D.50%

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Bank Muri has $4 million in cash and $5 million in loans coming due tomorrow with an expected default rate
of 1%. The proceeds will be deposited overnight. The bank owes $ 9 million on a securities purchase that
settles in two days and pays off $8 million in commercial paper in three days that is not expected to renew. On
day 2, $1 million in loans is coming in with an expected default rate of 1% and on day 3, $2 million in loans is
coming in with expected default rate of 2%. How much should the bank plan to raise in order to avoid liquidity
problems?

• A.$550 million
• B.$508 million
• C.$500 million
• D.$510 million

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A risk analyst is considering how to reduce the bank's exposure to rising interest rates. Which of the following
strategies will help her achieve this objective?
I. Reducing the average repricing time of its loans
II. Increasing the average repricing time of its deposits
III. Entering into interest rate swaps
IV. Improving earnings capacity and increasing intermediated funds

• A.III
• B.I, II
• C.IV
• D.I, II, IV

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