Why Do FIs Face a Return or Interest Earnings Penalty

question 16

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.

---

Definitions:

Intermarriage

Marriage between partners who are from different social, racial, religious, ethnic, or cultural backgrounds.

Racism

Prejudice, discrimination, or antagonism directed against individuals or groups based on their race or ethnicity, often stemming from a belief in racial superiority or inferiority.

Internal Colonialism

A concept that explains how a country's dominant group exploits minority groups for its economic advantage, often creating economic and political inequalities within a nation.

Brain Size

The physical measurement of the brain's volume, often discussed in relation to cognitive abilities or evolutionary biology.