ABC Bank acquires XYZ Bank through a merger but subsequently fails due to some unforeseen incompatibilities resulting from their widely different cultures. This is an example of __________ risk. a. operational b. liquidity c. market d. country 2.An advantage of inflation rate targeting is a. it reduces inflationary expectations. b. inflation rates are easy to measure and forecast. c. there is almost no lag in inflation rate data. d. it allows the Federal Reserve an optimal amount of flexibility in conducting monetary policy. 3. ABC Bank has a significant portion of its assets in the form of US Treasury securities. Imagine that something happens that creates an expectation that the United States may default on its interest payments on its debt. This is an example of what kind of risk? a. Country risk b. Liquidity risk c. Operational risk d. Market risk 4. Banks want to hold as little cash as possible because holding cash a. provides very little liquidity. b. offers a minimal rate of return. c. is risky. d. provides too much liquidity.

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter13: Money And The Financial System

Section: Chapter Questions

Problem 2.8P

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ABC Bank acquires XYZ Bank through a merger but subsequently fails due to some unforeseen incompatibilities resulting from their widely different cultures. This is an example of __________ risk.

	a.	operational
	b.	liquidity
	c.	market
	d.	country

2.An advantage of inflation rate targeting is

	a.	it reduces inflationary expectations.
	b.	inflation rates are easy to measure and forecast.
	c.	there is almost no lag in inflation rate data.
	d.	it allows the Federal Reserve an optimal amount of flexibility in conducting monetary policy.

ABC Bank has a significant portion of its assets in the form of US Treasury securities. Imagine that something happens that creates an expectation that the United States may default on its interest payments on its debt. This is an example of what kind of risk?

	a.	Country risk
	b.	Liquidity risk
	c.	Operational risk
	d.	Market risk

Banks want to hold as little cash as possible because holding cash

	a.	provides very little liquidity.
	b.	offers a minimal rate of return.
	c.	is risky.
	d.	provides too much liquidity.

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