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FINA 510 ASSI 6 - ASSIGNMENT 6 FINA 510 SAPAN PANCHAL ID 1...

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ASSIGNMENT 6 FINA 510 SAPAN PANCHAL ID 110-00-3260 1. If we examine a typical bank's asset portion of the balance sheet, how are the assets arranged in terms of expected return and liquidity? Answer:- In banking, liquidity is the ability to meet obligations when they come due without incurring unacceptable losses. Managing liquidity is a daily process requiring bankers to monitor and project cash flows to ensure adequate liquidity is maintained. Maintaining a balance between short-term assets and short-term liabilities is critical. For an individual bank, clients' deposits are its primary liabilities whereas reserves and loans are its primary assets . The investment portfolio represents a smaller portion of assets, and serves as the primary source of liquidity. Investment securities can be liquidated to satisfy deposit withdrawals and increased loan demand. Banks have several additional options for generating liquidity, such as selling loans, borrowing from other banks , borrowing from a central bank
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