Which type of financial intermediary is more highly exposed to liquidity risk?
A)Property-casualty insurance companies.
B)Life insurance companies.
C)Mutual funds.
D)Depository institutions.
E)Pension funds.

Question

Quizplus · Accepted Answer

Depository institutions like banks are more highly exposed to liquidity risk as they rely on short-term deposits to fund long-term loans and investments. If there is a sudden withdrawal of these deposits, they may not have enough cash on hand to meet the demand and may be forced to sell off assets at a loss to raise funds.

Which Type of Financial Intermediary Is More Highly Exposed to Liquidity