Depository Institution Create Liquidity When They

question 332

Multiple Choice

Depository institution create liquidity when they

• A) buy assets that are liquid.
• B) borrow short and lend long.
• C) have liabilities that are illiquid.
• D) borrow long and lend short.

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Definitions:

Financially Distressed

The state of a company or individual facing financial difficulty, often unable to meet debt obligations or manage cash flow effectively.

Bankruptcy

A legal process where individuals or businesses unable to meet their debt obligations can seek relief from some or all of their debts.

Secured Bondholders

Investors holding bonds backed by collateral, giving them a claim on assets in case the issuer defaults.