Principal roles that a financial institution's investment portfolio plays include which of the following?

Question

Quizplus · Accepted Answer

All of the options are correct. A financial institution's investment portfolio plays various roles such as providing income stability, geographic diversification, hedging interest rate risk, and backup liquidity. Each of these roles helps the institution to manage its risks and achieve its financial goals. For example, income stability can help the institution to meet its cash flow needs, while geographic diversification can reduce its exposure to regional economic fluctuations. Similarly, hedging interest rate risk can protect against changes in interest rates, and backup liquidity can help to meet sudden funding needs or unexpected withdrawals. Therefore, all of these roles are important for a financial institution's investment portfolio.

Principal Roles That a Financial Institution's Investment Portfolio Plays Include