CBP Treasury Management and Capital Markets

Question 1

What is the primary function of a bank's treasury department?

Accepted Answer

Managing the bank's liquidity, funding, interest rate risk, and capital markets activities

Answer

Processing retail customer deposits

Answer

Underwriting commercial insurance products

Answer

Administering employee pension plans

Question 2

What is the federal funds rate in the US banking system?

Accepted Answer

The interest rate at which depository institutions lend reserve balances to each other overnight

Answer

The interest rate the Federal Reserve charges commercial banks for emergency loans

Answer

The rate at which the US Treasury borrows from commercial banks

Answer

The minimum interest rate banks must charge on consumer loans

Question 3

What does 'duration' measure in the context of fixed-income portfolio management?

Accepted Answer

The sensitivity of a bond's price to changes in interest rates

Answer

The number of years until a bond matures

Answer

The length of time a bond has been held in a portfolio

Answer

The time needed to liquidate a bond position in the market

Question 4

In capital markets, what is a 'repurchase agreement' (repo)?

Accepted Answer

A short-term borrowing arrangement where securities are sold with an agreement to repurchase them at a higher price

Answer

A corporate stock buyback program

Answer

A long-term government bond issuance program

Answer

An agreement to repurchase non-performing loans from another bank

Question 5

What is 'net interest margin' (NIM) and why is it important to bank treasury management?

Accepted Answer

The difference between interest income earned on assets and interest paid on liabilities, expressed as a percentage of earning assets

Answer

The percentage of non-performing loans in the portfolio

Answer

The spread between the bank's stock price and book value

Answer

The ratio of fee income to total revenue

Question 6

Which market serves as a primary venue for banks to issue and trade short-term debt instruments with maturities of one year or less?

Accepted Answer

Money market

Answer

Equity capital market

Answer

Derivatives market

Answer

Foreign exchange spot market