Question 1
a) Suggest which factors have the most significant impact on a financial-service institution's decision regarding the different maturities of securities it should hold. Support your position.
b) Determine why it is important that banks and other institutions choose to devote a significant portion of their assets to investment securities. Provide a unique example to support your answer.
Question 2
a) Suggest how a manager can estimate a financial institution's need for liquidity. Determine why it is important for a manager to be able to do this.
b) Determine the best way that the discipline of the marketplace can be used as a guide for making liquidity management decisions. Support your position with an example.
Question 3
a) From the e-Activity, determine two ways that a financial institution can benefit from knowing the Federal Reserve Discount Rate. Predict two ways that this knowledge can improve a financial institution's business profits.
b) Determine whether or not you believe that the composition of deposits change in recent years has benefited the banking institutions and / or the consumers. Support your answers.
Question 4
a) Suggest what you believe to be the most significant advantages and risks that the pursuit of liability management brings to a borrowing institution. Propose two ways to maximize the advantages and two ways to minimize the risks involved.
b) Determine the factors that the manager of a financial institution must weigh when choosing among the various non-deposit sources of funding available today. Support your position by explaining why these factors are important.