The cost to a bank of holding too many liquid assets is:
A)a very high reserve rate.
B)interest lost on loans and holding securities.
C)not having cash in the vault.
D)leaving it exposed to default risk.

Question

Quizplus · Accepted Answer

Holding too many liquid assets means that the bank has less money to lend, which results in interest being lost on loans. This is the cost to the bank for holding too many liquid assets. The other options are not valid costs associated with holding too many liquid assets.

The Cost to a Bank of Holding Too Many Liquid