17-56 a Disadvantage of Using Asset Management to Manage a FI's

question 70

Multiple Choice

17-56 A disadvantage of using asset management to manage a FI's liquidity risk is

• A)the resulting shrinkage of the FI's balance sheet.
• B)the high cost of purchased liabilities.
• C)the accessibility of international money markets.
• D)tax considerations.
• E)loss of flexibility as a result of dependence upon purchased liabilities.

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Definitions:

Par Value

Refers to the face value of a bond or the stated value of a stock, indicating the amount that will be paid out at maturity or represented in the corporation's documents.

Secured Bonds

Bonds that are backed by specific collateral that must be forfeited in the event that the issuing firm defaults.