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) Explain liquid asset management as it relates to a financial institu

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter16: Capital Structure Decisions

Section: Chapter Questions

Problem 4MC

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Question

(a) Explain liquid asset management as it relates to a financial institution
(b) Explain the risk-return trade-off for liquid assets.

Expert Solution

Step 1 Note

As per company policy, it s only possible to solve the first part.

Step 2 Introduction

Liquid assets are those assets which can be converted into cash or cash equivalents and canbe used within a year.

The financial institution is an institution which accepts deposits from general public and lends that money further to corporates.

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