A Financial Intermediary Has Two Assets in Its Investment Portfolio

question 44

Multiple Choice

A financial intermediary has two assets in its investment portfolio. It has 35% of its security portfolio invested in one-month Treasury bills and 65% 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 [(0.35 x 0.98) + (0.65 x 0.85)]/[(0.35 x 1.00) + (0.65 x 0.94)] = 0.93

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