What are some of the ways that banks can borrow short-term funds when they need "liquidity"? (Select all that apply; three of the answers below are correct.) Reference: Chapters 11 & 12 They can borrow directly from the Securities & Exchange Commission through the "regulatory" market. They can borrow from the Department of Treasury through the "Treasury" window. They can borrow another bank's reserves through the "fed funds" market. The can engage in a "sale & repurchase agreement" (or "repo") by selling some of their securities to another financial insitution and promising to buy them back the next day. They can borrow directly from the Federal Reserve through the "discount window"
What are some of the ways that banks can borrow short-term funds when they need "liquidity"? (Select all that apply; three of the answers below are correct.) Reference: Chapters 11 & 12 They can borrow directly from the Securities & Exchange Commission through the "regulatory" market. They can borrow from the Department of Treasury through the "Treasury" window. They can borrow another bank's reserves through the "fed funds" market. The can engage in a "sale & repurchase agreement" (or "repo") by selling some of their securities to another financial insitution and promising to buy them back the next day. They can borrow directly from the Federal Reserve through the "discount window"
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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What are some of the ways that banks can borrow short-term funds when they need "liquidity"?
(Select all that apply; three of the answers below are correct.)
Reference: Chapters 11 & 12
They can borrow directly from the Securities & Exchange Commission through the "regulatory" market.
They can borrow from the Department of Treasury through the "Treasury" window.
They can borrow another bank's reserves through the "fed funds" market.
The can engage in a "sale & repurchase agreement" (or "repo") by selling some of their securities to another financial insitution and promising to buy them back the next day.
They can borrow directly from the Federal Reserve through the "discount window".
Expert Solution
Step 1
Liquidity
Liquidity of a bank means the ability of the bank to obtain funds to meet its short-term financial needs. It is necessary to keep a small percentage of the asset in the form of a liquid asset so that assets can be converted into cash easily and financial needs can be met.
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