Which of the Following Statements About Depository Institutions Is False

question 30

Multiple Choice

Which of the following statements about depository institutions is false?

• A)They borrow at lower interest rates and lend at higher rates.
• B)They keep reserves to meet cash withdrawals.
• C)They create liquidity by borrowing long and lending short.
• D)They pool, and therefore reduce, risk.
• E)A credit union is an example of a depository institution.

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Definitions:

IPO Offering

The initial sale of stock to the public by a company, a critical moment in a private company’s lifecycle to raise capital and enhance its visibility.

Publicly Traded

Describes a company whose shares are available for purchase by the general public on a stock exchange.

Conversion Ratio

The specific number of shares an investor can receive for every convertible security if they decide to convert it into stock.

Convertible Bond

A type of bond that can be converted into a predetermined number of the issuer's shares, typically at the option of the holder.