1. A currency swap is:   

a. an exchange of floating-rate payments for fixed-rate payments.

b. an exchange of one currency for another currency in the spot exchange market.

c. an exchange of interest payments denominated in one currency for interest payments denominated in another currency.

d. an exchange of debt covenant terms in one country for those in another country.

2. When a bank relies on a policy of "purchased liquidity," it will generally be using more expensive funds.

True

False

3. When a bank deals with deposit "drainage" by buying more fed funds or entering the repurchase agreement market, we say the bank is using:

a. long-term funding sources

b. core deposits

c. purchased liquidity

d. liquidation of assets

4. When the spread between interest rates on RSA and RSL ____________, the bank's net interest income would be expected to ____________.

a. increases; increase

b. increases; decrease

c. decreses; increase

d. decreases; decrease