Consider the Following Situation: an FI Holds 40 Per Cent

question 7

Multiple Choice

Consider the following situation: an FI holds 40 per cent of its assets in liquid securities with a fair market value of $100 and the remaining 60 per cent of its assets in housing loans with a fair market value of $500.Further assume that in case of immediate liquidation, the FI would receive $90 for its liquid securities and $450 for its housing loans.What is the FI's liquidity index (round to two decimals) ?

• A)0.19
• B)0.54
• C)0.67
• D)0.90

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Definitions:

Manufacturing Overhead

All indirect costs associated with the production process, such as utilities, depreciation on equipment, and factory rent.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead costs to products based on a selected activity base such as machine hours or labor hours.

Direct Labor-Hours

The full extent of hours dedicated by employees who are directly integrated into the production process.

Manufacturing Overhead

All indirect factory-related costs incurred during the production process, excluding direct materials and direct labor costs.