Answer the questions below well.

A bank's decision to reduce loans and advances to customers and increase its reserve balances at

the central bank whilst holdings of other liquid assets are held constant will:

A increase the liquidity ratio and increase the maturity gap.

B increase the liquidity ratio and decrease the maturity gap.

C decrease the liquidity ratio and increase the maturity gap.

D decrease the liquidity ratio and decrease the maturity gap.

14.2 Which of the following is NOT a tool that the Bank of England uses to provide liquidity insurance for

the banking system?

A discount window facilities

B quantitative easing

C contingent term repo facilities

D index long-term repos

Which of the following ratios is the ratio of a company's borrowed capital to shares?

A capital adequacy

B gearing

C liquidity

D net stable funding

Suppose that a 10,000 increase in monetary base results in a 40,000 increase in M4. If the public

hold all their money in bank accounts, then the banks' reserve ratio is equal to:

A 0.10

B 0.175

C 0.20

D 0.25

Outline the role of financial instruments, financial markets and financial institutions in a financial

system.

(i) List the main functions of the central bank.

(ii) Explain the two main ways in which the Bank of England, in its role as lender of last resort,

uses the money markets to provide liquidity to the banking system and exercises control

over interest rates.

Describe the measures that have been (or are in the process of being) introduced to try to reduce

the likelihood and the impact of a future financial crisis.

Discuss the effects of securitisation on the banking system

The joint p.d.f. of T(x) and T(y) is given by fromy(s, t) = (1 - 1)(n - 2) 0 2. (1 + s + t ) " Find: a. The joint d.f. of T(x) and T(y). b. The p.d.f., d.f., and p(x + s) for the marginal distribution of T(x). Note the symmetry in s and t which implies that T(x) and T(y) are identically distributed. c. The covariance and correlation coefficient of T(x) and T(y), given that n > 4. Display the joint survival function of [T(x), T(y)] where the distribution is defined in Exercise 9.1. The future lifetime random variables T(x) and T(y) are independent and iden- tically distributed with p.d.f. f(t ) = n - 2 (1 + t ) "-1 n > 3, t> 0. Determine the joint d.f. and the joint survival function.In terms of the single life probabilities "pi and "if?!\" express a. The probability that (my) will survive a years b. The probability that exactly one of the lives (it) and (y) 1will survive a years c. The probability that at least one of the lives (2:) and (y) will survive a years d. The probability that (xy) will fail within a years e. The probability that at least one of the lives will die within a years i. The probability that both lives will die within a years. Show that the probability that {x} survives it years and (y) survives n - 1 years may be expressed either as raping1 ply1 01' E15 pa: n- 1px+1:y' Evaluate f tpxx \"11\"} di' [I Using the distribution of r] and y} shown in Exercise 9.] display {a} the cl.f., (b) the survival function, and (c) E[T(.ty]l] [or Hay). Assume n I? 3. Use {9.3.8} to obtain the poll. of Racy) for the joint distribution of TIII} and y] given in Example. 9-2.3. ion 9.4 Show EFF}! = 1px]; + I'Px '1 _ ill-3y) _ :Fy (1 _.. tpxl algebraically and by general reasoning. . Find the probability that at least one of two lives (I) and (y) will die in the year {a + 1). Is this the same as "log? Explain. . The random variables T1135} and y] have the joint pail. displayed in Exercise 9.1. Find (a) the if. and the p.d.f. of T5197], [bl E[T(x_y)] for r: 2} 3, and {c} \"g )- I'oa 9.5 _. Given that 25p15 = 0.2 and 15p25 = 0.9, calculate the probability that a person age 40 will survive to age 75