If the market value of what it has lent is less than the market value of it has borrowed, a financial institution's net worth is ________ and it is ________.
A) negative; illiquid but not necessarily insolvent
B) negative; insolvent but not necessarily illiquid
C) positive; illiquid and insolvent
D) negative; illiquid and insolvent
E) positive; insolvent but not necessarily illiquid

Question

Quizplus · Accepted Answer

If the market value of what a financial institution has lent is less than what it has borrowed, its liabilities exceed its assets, making its net worth negative and indicating insolvency. However, it may not necessarily be illiquid if it can still meet short-term obligations.

If the Market Value of What It Has Lent Is