Which of the Following Statements Is True

question 44

Multiple Choice

Which of the following statements is true?

• A)Large increases in the value of the OBS assets can render an FI economically insolvent.
• B)Large increases in the value of the OBS liabilities will not render an FI economically insolvent as the liabilities are only contingent.
• C)Large increases in the value of the OBS liabilities will not render an FI economically insolvent as the net worth of the institution will not be affected.
• D)Large increases in the value of the OBS liabilities can render an FI economically insolvent.

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Definitions:

Capital Market Securities

Long-term financial instruments traded in capital markets, such as bonds, stocks, or debentures.

Liquid

Describes an asset that can be quickly converted into cash without significant loss of value or a market where such assets can be bought or sold with ease.

Financial Intermediaries

Institutions that facilitate the channeling of funds between savers and borrowers by intermediating financial transactions.

Stocks

Financial instruments that signify ownership in a corporation and represent a claim on part of the corporation's assets and earnings.