A disadvantage of using purchased liquidity management to manage a FI's liquidity risk is
A)the resulting shrinkage of the FI's balance sheet.
B)the relatively high cost of purchased liabilities.
C)the accessibility of international money markets.
D)tax considerations.
E)loss of flexibility as a result of dependence upon purchased liabilities.

Question

Quizplus · Accepted Answer

Purchased liquidity management can be costly because it involves acquiring funds at potentially higher interest rates, making it an expensive option for managing liquidity risk.

A Disadvantage of Using Purchased Liquidity Management to Manage a FI's