What Does a High Proportion of Brokered Deposits Indicate

question 31

Multiple Choice

What does a high proportion of brokered deposits indicate?

• A)Total risk-based capital ratio of the DI is less than 10 percent.
• B)Above average risk, and thus an increased potential for failure.
• C)Less informed savers are protected against a reduction in wealth.
• D)Reduced insolvency risk as brokered deposits are covered under deposit insurance.
• E)Lower levels of credit risk.

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Definitions:

Interest Rate

The cost of borrowing money, expressed as a percentage of the amount borrowed.

Opportunity Cost

Opportunity cost is the cost of the opportunity forgone to pursue one option instead of another, representing the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Investment

The allocation of resources, usually monetary, into assets or projects expected to generate future profits or income.

Equilibrium Interest

The interest rate at which the demand for funds equals the supply of funds, balancing savings and investment in the economy.