An financial institution has 2 kinds of assets: 50% in T-bill and 50% in consumer loan. If
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An financial institution has 2 kinds of assets: 50% in T-bill and 50% in consumer loan. If the assets in the portfolio need to be liquidated at short notice, the T-bill is sold at $97 even though its fair value is $98. The consumer loan is sold at $76 even though its fair value is $90. Calculate the liquidity index.
if the market conditions change suddenly and the T-bill and consumer loan are sold at $93 and $89 respectively at short notice. Calculate the new liquidity index.
interpret the liquidity risk faced by the financial institution before and after the market conditions change.
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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