Short-Term Debt Has a Greater Risk of Illiquidity Than Long-Term

question 36

True/False

Short-term debt has a greater risk of illiquidity than long-term debt because it must be rolled over more frequently and its use creates more uncertainty concerning future interest rates.

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Definitions:

Federal Reserve

The central banking system of the United States, responsible for implementing monetary policy, supervising banks, and providing financial services.

Large-Denomination Time Deposits

High-value deposits made in a bank or financial institution with a fixed term and interest rate, typically not accessible before maturity without penalty.

Money Market Deposit Accounts

Interest-bearing accounts offered by banks with typically higher interest rates than savings accounts, with certain restrictions.

Narrow Definition

The narrow definition refers to a specified or limited interpretation of a term, focusing on a specific aspect or characteristic, excluding broader contexts or meanings.