Which of the following is the risk that FIs face when depositors withdraw deposits without warning?
A)liquidity risk
B)default risk
C)exchange rate risk
D)interest rate risk

Question

Quizplus · Accepted Answer

When depositors withdraw deposits without warning, FIs face liquidity risk as they may not have enough liquid assets to meet the sudden demand for withdrawals. Default risk pertains to the risk of borrowers not making payments, exchange rate risk pertains to the risk of loss due to fluctuations in exchange rates, and interest rate risk pertains to the risk of loss due to changes in interest rates.

Which of the Following Is the Risk That FIs Face