Why Have Purchased Liquidity Management Techniques Become Very Popular in Spite

question 104

Multiple Choice

Why have purchased liquidity management techniques become very popular in spite of its limitations?

• A)Because it insulates the assets of an FI from normal drains on liability liquidity.
• B)Because funds can be easily raised in the eventuality of a liquidity crunch.
• C)Because of decrease in the cost of funds during periods of high interest rate volatility.
• D)Because the funds are covered by deposit insurance.
• E)Because the adjustment to the deposit drain occurs on the liability side of the balance sheet.

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Definitions:

Reportable Segments

This refers to distinct components of a business for which separate financial information is available and is regularly reviewed by the company's decision-makers.

Interest Revenue

Income earned by a company from its lending activities or from holding interest-bearing financial assets.

Seasonal Revenues

Income generated from business activities that fluctuates according to the season or a particular time of year, typical in industries like retail and agriculture.