Question

True or False: and why

1-Money markets are used to buy and sell assets that are short-term in duration but higher risk than ordinary assets.

2-Banks do not have the same financial ratios as other companies.

3-Liquidity risk is the probability that a bank will not be able to pay its interest expenses.

4-Net interest margin is the difference between the yield on a government security and the rate on loans issued by a bank.

Answer 1

1.False.

Money market instruments are considered to be a lower risk investment class compared to equity, bonds and i other assets. This is because it's main constituents are cash bank deposits, etc are perceived to be relatively risk free.

2.. True

Financial reporting in in banking industry is significantly different , because the central objective of bank is to attract funds at an acceptable cost and reinvestment them for earning higher profit. Therefore they are using ratios such as liquidity, profitability , risk exposure etc.

3 False.

Because liquidity isa banks ability to meet cassh and collateral obligations not only interest payments.

4.False.

Net interest margin of bank is the difference between the net interest income generated less interest paid.