An FI can reduce liquidity risk by which of the following?
A)requiring rigid credit checks
B)making long-term loans
C)holding highly liquid assets
D)All of the above are correct.

Question

Quizplus · Accepted Answer

Holding highly liquid assets can reduce liquidity risk as they can be easily sold in the market to meet cash withdrawals or payment obligations. Requiring rigid credit checks and making long-term loans may address credit risk and interest rate risk, but they do not directly mitigate liquidity risk. Therefore, option C is the most appropriate choice.

An FI Can Reduce Liquidity Risk by Which of the Following