Consider the Following Situation: an FI Holds Two Assets in Equal

question 68

Multiple Choice

Consider the following situation: an FI holds two assets in equal proportions, these being liquid securities with a fair market value of $200 and housing loans with a fair market value of $800.Further assume that in case of immediate liquidation, the FI would receive $185 for its liquid securities and $700 for its housing loans.What is the FI's liquidity index (round to two decimals) ?

• A)I = (185/200) + (700/800) = 1.80
• B)I = (185/200) * (700/800) = 0.81
• C)I = 0.5 * (185/200) + 0.5 * (700/800) = 0.90
• D)I = [0.5 * (185/200)] * [0.5 * (700/800)] = 0.20

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Definitions:

Retroactive Interference

The phenomenon where new memories impair the retrieval of older memories.

Hindsight Bias

The tendency to believe, after learning an outcome, that one would have foreseen it, often referred to as the "I-knew-it-all-along" effect.

Proactive Interference

The effect wherein earlier memories hinder the ability to remember more recent memories.

Retroactive Interference

A memory disruption phenomenon where new information interferes with the ability to recall old information.