Q1.Which one of the following statements is not true? a. Asset-side risk arises from transactions that...
Q1.Which one of the following statements is not true?
a. Asset-side risk arises from transactions that result in a transfer of cash to some other asset, such as the exercise of a loan commitment or a line of credit
b. Liability-side risk arises from transactions whereby shareholders of the financial institution claim cash returns on their equity Investments
c. Liquidity risk occurs because of situations that develop from economic and financial transactions
d. Liquidity risk is reflected on either the asset side of the balance sheet or the liability side of the balance sheet of a financial institution.
Homework Answers
Answer : Option (b) Liability-side risk arises from transactions whereby shareholders of the financial institution claim cash returns on their equity Investments .
Reason :
Liability -side risk arises from transactions where creditor,any other holder of the claim or depositor demands cash for exchange of their claim.Therefore Liability-side risk does not arises from transactions whereby shareholders of the financial institution claim cash returns on their equity Investments. All other statements(a.,b.,c.) are true except Statement (b.)
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