Why Do FIs Face a Return or Interest Earnings Penalty

question 14

Multiple Choice

Why do FIs face a return or interest earnings penalty by holding large amounts of assets such as cash, T-bills, and T-bonds to reduce liquidity risk?

• A)These assets carry a reserve requirement tax.
• B)These assets offer low returns.
• C)These assets offer higher returns that reflect their risk.
• D)Inflation increases the purchasing power value of these assets.
• E)All of these.

---

Definitions:

Television

A system for transmitting visual images and sound that are reproduced on screens, primarily used for broadcasting entertainment, news, and information.

Hot Media

Media that contain a great deal of information but involve only a single sensory organ and demand very little from their audience (e.g., newspapers).

McLuhan

A Canadian philosopher best known for his work on media theory, including the concepts of the global village and the medium is the message.

Traditional Sociology

The study of social behaviors, institutions, and functions using established theories and methodologies from the discipline's history.