Which of the Following Statements Is True of the Liquidity

question 6

Multiple Choice

Which of the following statements is true of the liquidity of banks?

• A) The more cash banks loan to customers, the lower its profits but the higher its liquidity.
• B) Banks face liquidity problems because they borrow long and lend short.
• C) The more cash a bank keeps in securities, the higher its liquidity and the lower its profits.
• D) In order to increase their liquidity, banks need to purchase government bonds from the

---

Definitions:

Remittance

A transfer of money by a foreign worker to an individual in his or her home country.

Discount Period

The time frame in which a buyer can pay less than the full amount due, often in return for early payment to the seller.

Complement Rate

Another term for a probabilistic or statistical rate that completes another rate to 100% or a whole when combined.

Net Price

The price of a good or service after all discounts, rebates, and other cost reductions have been applied, not including additional charges such as shipping or taxes.