Pound Bank has £250 million in sight deposits and £250 million of other liabilities. It has liquid assets of £125 million. Pound Bank currently has a liquidity ratio of

Question

Quizplus · Accepted Answer

The liquidity ratio is calculated as the ratio of liquid assets to sight deposits. Here, it is £125 million / £250 million = 0.5 or 50%. However, the correct calculation for liquidity ratio in this context should actually consider liquid assets over total liabilities (sight deposits + other liabilities = £500 million), making the correct liquidity ratio £125 million / £500 million = 25%. Therefore, the correct answer is C) 25%.

Pound Bank Has £250 Million in Sight Deposits and £250