A Financial Intermediary Has Two Assets in Its Investment Portfolio

question 45

Multiple Choice

A financial intermediary has two assets in its investment portfolio. It has 35 percent of its security portfolio invested in one-month Treasury bills and 65 percent in real estate loans. If it liquidated the bills today,the bank would receive $98 per hundred of face value. If the real estate loans were sold today,they would be worth $85 per 100 of face value. In one month,the real estate loans could be liquidated at $94 per 100 of face value. What is the intermediary's one-month liquidity index?

• A)0.93
• B)0.92
• C)0.91
• D)0.90
• E)0.89

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Definitions:

Logical Operations

Mental processes involved in reasoning and understanding logical relationships among concepts or practices.

Cognitive Development

The process by which a person acquires ability to reason, solve problems, and understand the world around them, through the interaction of genetic and learned factors.

Static Reasoning

A cognitive state where a person believes the world is unchanging, and what is true now will always be true.

Abstract Reasoning

The ability to analyze information, detect patterns and relationships, and solve problems on a complex level that is not directly tied to concrete experiences.