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Book 4 Section 1 Reading 1 – 10 | Test Round 1

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Book 4 Section 1 Reading 1 – 10 | Test Round 1

Shashank 24th March 2024

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Question 1 of 5

1. Question
A company intends to liquidate a large position in a security that is vulnerable to predatory trading. Predatory trading is most likely to occur under which of the following circumstances?
- A) When the company is looking to invest in more securities.
- B) When market participants are unaware of the company's intention to liquidate.
- C) When other market participants anticipate the company's large sale and place trades to profit from the price movement.
- D) When the company liquidates its position over an extended period to avoid detection.
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Question 2 of 5

2. Question
Which of the following scenarios exemplifies the interplay between transactions liquidity and funding liquidity, potentially leading to a debt-deflation crisis?
- A. A rapid increase in market liquidity due to an influx of foreign investments.
- B. A gradual increase in the yield curve slope, making long-term investments more appealing.
- C. Rapid deleveraging by investors forced to sell assets to meet funding requirements, leading to a drop in asset prices.
- D. A decrease in short-term interest rates, encouraging more investors to borrow and invest in the stock market.
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Question 3 of 5

3. Question
Which of the following is an example of a leading and granular EWI for liquidity risk management?
- A) A quarterly report on overall bank deposits
- B) A daily analysis of specific customer group deposit trends
- C) An annual review of the bank's loan portfolio
- D) A monthly statement of the bank's total assets and liabilities
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Question 4 of 5

4. Question
What advantage does commercial paper offer to issuers compared to other short-term financing options?
- A) It requires collateral for issuance.
- B) It offers a higher interest rate than bank loans.
- C) It allows for direct access to capital markets, potentially lowering financing costs.
- D) It has a maturity period longer than one year.
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Question 5 of 5

5. Question
In anticipation of a potential economic downturn, ABC Bank has adjusted its investment maturity strategy. The bank expects interest rates to fall and aims to lock in higher yields before the downturn. Which of the following strategies is ABC Bank most likely implementing?
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