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If a bank prepares for its liquidity needs by holding more cash and/or marketable securities, it...

If a bank prepares for its liquidity needs by holding more cash and/or marketable securities, it is using a/an
_________________approach.

A. purchased liquidity
B. "hot money"
C. liquidity index
D. stored liquidity
E. (a) and (b)

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Answer #1

D stored liquidity

Purchased liquidity refers to raising money for short term by borrowing funds. Hot money refersto offering relatively short-term certificates of deposit at high interest rates. Liquidity index  refers to the days required to convert a company's trade receivables and inventory into cash. Stored liquidity refers to holding excess non-interest bearing assets like cash and marketable securities.

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