When Banks Use Stored Liquidity Management, They

question 40

Multiple Choice

When banks use stored liquidity management, they

• A)must pay interest on the funds that are stored.
• B)store the funds at the U.S.Treasury.
• C)necessarily increase the asset side of the balance sheet.
• D)may shrink the balance sheet if cash is used as the liquidity adjustment mechanism.
• E)threaten the capital position of the institution.

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Definitions:

Quadratic Function

A polynomial function of the second degree, generally represented as f(x) = ax^2 + bx + c, where a, b, and c are constants and a ≠ 0.

Factoring

A financial transaction where a business sells its accounts receivable to a third party at a discount to gain immediate cash.

Quadratic Formula

A formula used to solve for x given a quadratic equation; x = (–b ± √(b^2 – 4ac)) / 2a.

Expense Equation

The sum of the fixed and variable expenses.