If Purchased Liquidity Is Used by a DI to Fund

question 82

Multiple Choice

If purchased liquidity is used by a DI to fund an exercised loan commitment

• A)the balance sheet will decrease by the amount of the new loan.
• B)only the asset side of the balance sheet will increase.
• C)the balance sheet will increase by the amount of the new loan.
• D)only the liability side of the balance sheet will increase.
• E)there will be no effect on the balance sheet.

---

Definitions:

Interest to be Collected

The amount of interest income that has been earned but not yet received in cash.

Cash Loan

A short-term loan provided to a borrower in cash, meant to be repaid with interest over a predetermined period.

Interest Collected

The amount of interest payments received by a lender from a borrower over a specified period of time.

Percent of Receivables Method

A method used in accounting to estimate bad debts expense based on a percentage of accounts receivable judged to be uncollectible.