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Liquidity Risk Quiz

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1. What does liquidity risk refer to in finance?

2. Which of the following is a primary factor contributing to liquidity risk?

3. Which type of liquidity risk occurs when an entity is unable to convert assets into cash without incurring a loss in a given market condition?

4. In the context of liquidity risk, what does 'haircut' refer to?

5. What is one way companies can mitigate liquidity risk?

6. Which of the following best describes the relationship between liquidity risk and returns from investments?

7. What can banks do to manage liquidity risk?

8. What is the 'liquidity coverage ratio' in the context of banking?

9. If a firm faces difficulty in meeting immediate obligations due to insufficient cash or saleable assets, it is primarily facing which type of liquidity risk?

10. Which financial crisis event led to a greater emphasis on managing liquidity risk in financial institutions?