1. Of the following, which is NOT a standard bond feature?

1. Of the following, which is NOT a standard bond feature?

A.   Floating-interest rate coupons.

B.   Half-yearly coupons.

C.   Redeemed by the payment of face value.

D.   Face value payable at the maturity date.

E.    All of these are standard bond features.

2. Treasury bond investors are exposed to:

A.   credit risk

B.   price risk

C.   reinvestment risk

D.   price risk and reinvestment risk

E.    credit risk, price risk and reinvestment risk.

3. Which of the following is NOT a role of the bond market?

A.   Being a source of long-term capital for wholesale borrowers.

B.   Providing wholesale investors with access to a long-term, defensive investment.

C.   Performing the price discovery process for long-term interest rates.

D.   Providing a mechanism for the RBA to implement its monetary policy.

E.    All of these are bond market functions.

4. The money market contributes to the banking system by:

A.   being the main location for its liquid reserves, such as loans to the interbank overnight market

B.   allowing the RBA to drop its requirement that banks hold liquid reserves with it

C.   being a source of funds for banks, mainly through NCDs

D.   enabling banks that accept bills to sell them to investors.

E.    All of these.

5. The BBSW (Australia’s money market reference rate) is calculated from the yields at which _______________ trade.

A.   Treasury notes

B.   Treasury bonds

C.   prime NCDs and BABs

D.   ES funds

E.    overnight interbank funds

6. What is the main risk faced by ADIs?

A.   Liquidity risk

B.   Funding risk

C.   Credit risk

D.   Market and interest rate risks

E.    Operating risk

7. The ‘counter-cyclical capital buffer’:

A.   can be imposed by APRA during periods of high credit growth in the banking system

B.   form part of the Basel III reforms

C.   should discourage excessive growth in risky bank assets during periods of high growth

D.   is an additional equity buffer of 2.5 per cent of a bank’s risk-weighted assets

E.    All of these.

8. ADI deposit accounts do NOT offer depositors:

A.   a safe place to keep funds

B.   a wide range of risk and return opportunities

C.   liquidity

D.   interest and/or payment services.

E.    All of these are benefits of deposit accounts.

9. A bank issues 90-day bank-accepted bills on behalf of a borrower for a fee of 50 basis points. Given a market yield of 4.5% and a face value of $1 million, what fee will the bank earn?

A.   $5000.00

B.   $1204.50

C.   $4945.13

D.   $4939.11

E.    None of these.

10. What type of loan arrangement is most common when banks lend to business?

A.   Revolving credit facilities

B.   Syndicated loans

C.   Standby facilities

D.   Term loans

E.    Leasing

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