The Liquidity Component of the CAMELS Rating Refers to

question 35

Multiple Choice

The liquidity component of the CAMELS rating refers to

• A)how a bank's earnings would change if economic conditions change.
• B)how readily a bank's management would detect its financial problems.
• C)a bank's sensitivity to financial market conditions.
• D)the type of loans that a bank provides, the bank's process for deciding whether to provide loans, and the credit rating of debt securities that it purchases.
• E)whether a bank frequently needs to borrow from outside sources, such as the federal funds market.

---

Definitions:

Compounded Quarterly

The process of calculating interest on both the initial principal and accrued interest from previous periods on a quarterly basis.

Present Value

The present value of a future amount of money or series of cash inflows, based on a certain rate of return.

Quarterly Payments

Payments that are made four times a year, typically related to dividends, loans, or lease agreements.

Amortization Schedule

A schedule of payments; the schedule shows the amount of interest and the amount of principal in each payment.