FRM 2026 Part I Foundations of Risk Management Liquidity Risk Free Quiz 1

Practice FRM 2026 Part I Foundations of Risk Management MCQs from Liquidity Risk. Get instant results with Explanation.

General10 MCQs

1. What is liquidity risk?

A. Liquidity risk is the same as credit riskB. Liquidity risk is the risk of being unable to meet short-term obligationsC. Liquidity risk is not significant for financial institutionsD. Liquidity risk is only about market liquidity

2. What is funding liquidity risk?

A. Funding liquidity risk is the risk of asset price declinesB. Funding liquidity risk is the same as market liquidity riskC. Funding liquidity risk is the risk of being unable to raise funds to meet obligationsD. Funding liquidity risk is not a type of liquidity risk

3. What is market liquidity risk?

A. Market liquidity risk is the risk of being unable to sell assets without price impactB. Market liquidity risk is the same as funding liquidity riskC. Market liquidity risk is only for equity marketsD. Market liquidity risk is not significant

4. What is the Liquidity Coverage Ratio (LCR)?

A. LCR requires banks to hold capital for credit riskB. LCR is a measure of market riskC. LCR is not part of the Basel III frameworkD. LCR requires banks to hold HQLA to cover 30-day cash outflows

5. What is the Net Stable Funding Ratio (NSFR)?

A. NSFR focuses on short-term liquidityB. NSFR requires stable funding over a one-year horizonC. NSFR is the same as the LCRD. NSFR is not part of the Basel III framework

General10 MCQs

6. What is a liquidity crisis?

A. Liquidity crises are not commonB. Liquidity crises only affect small banksC. Liquidity crises can occur when there is a sudden loss of confidenceD. Liquidity crises are always caused by credit risk

7. What does liquidity risk management involve?

A. Liquidity risk management includes maintaining liquid assets, diversifying funding, and stress testingB. Liquidity risk management is only about holding cashC. Liquidity risk management is not important for financial institutionsD. Liquidity risk management is the same as capital management

8. What is a contingency funding plan (CFP)?

A. A CFP is optional for financial institutionsB. A CFP is the same as a business continuity planC. A CFP is only for large banksD. A CFP sets out actions to be taken in the event of a liquidity crisis

9. What are liquid assets?

A. Liquid assets include all assets, regardless of their marketabilityB. Liquid assets can be easily converted to cash with little loss of valueC. Liquid assets are only cashD. Liquid assets are not important for liquidity risk management

10. What did Basel III introduce for liquidity risk?

A. Basel III does not address liquidity riskB. Basel III only addresses credit riskC. Basel III introduced the LCR and NSFR for liquidity riskD. Basel III introduced the LCR but not the NSFR

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