Which of the following items may expose an FI to liquidity risk?
A)$500 000 in demand deposits and $100 000 in overnight deposits made by another FI
B)$500 000 in demand deposits and $50 000 in credit line facilities
C)$500 000 in demand deposits, $100 000 in loan commitments and $50 000 in short-term securities
D)$500 000 in demand deposits, $100 000 in overnight deposits made by another FI and $50 000 in credit line facilities

Question

Quizplus · Accepted Answer

The $500,000 in demand deposits and $100,000 in overnight deposits made by another FI pose potential liquidity risk if those depositors need to withdraw their funds quickly. Additionally, the $50,000 in credit line facilities could also expose the FI to liquidity risk if those lines are drawn upon suddenly. The other answer choices do not include any items that directly pose liquidity risk.

Which of the Following Items May Expose an FI to Liquidity