Question

If a bank follows a strategy in which it buys reserves to cover loan requests they are likely doing:

a		funds management.
b		asset management.
c		liability management.
d		asset-liability coordinated management.
		eNone of the options is correct. You invest in a savings instrument in which you firstly make a lump sum payment. This amount is invested (i.e. by a manager) in different assets and at a later point you receive a stream of income. This is known as: a a leveraged buyout. b an annuity. c the net asset value. d a hedge fund. e None of the options is correct.

Answer 1

Hi,

Question 1: If a bank follows a strategy in which it buys reserves to cover loan requests they are likely doing?

Ans = C, Liability management.

Banks & other lenders use liability management to reduce liquidity risks and adverse market condition impacts.

Question 2: Ans = D, a Hedge fund.

Leveraged buyout = the purchase of a controlling share in a company by its management using outside capital.

Annuity = a fixed sum of money paid to someone each year, typically for the rest of their life.

Net Asset value (NAV) = is the value of an entity's assets minus the value of its liabilities (for funds)

Hedge Fund = An investment fund which collects money from HNI investors & Institutional investors & invests on various assets. Investors(usually not general public) need to pay a Management fee + Performance fee to enter into the fund and later you receive a stream of income.

Hope this helps.

Bala