Which of the following statements is true?
A)The relative illiquidity of a market reduces an FI's losses.
B)The relative illiquidity of a market exposes an FI to magnified losses.
C)The relative illiquidity of a market does not influence an FI's loss size.
D)None of the listed options are correct.

Question

Quizplus · Accepted Answer

The relative illiquidity of a market exposes an FI to magnified losses as it may be difficult to quickly sell assets or obtain funding, therefore increasing the potential of large losses.

Which of the Following Statements Is True