Question
A financial intermediary has two assets in its investment portfolio. It has 35 percent of its security portfolio invested in one-month Treasury bills and 65
A financial intermediary has two assets in its investment portfolio. It has 35 percent of its security portfolio invested in one-month Treasury bills and 65 percent in real estate loans. If it liquidated the bills today, the bank would receive $98 per hundred of face value. If the real estate loans were sold today, they would be worth $80 per 100 of face value. In one month, the real estate loans could be liquidated at $95 per 100 of face value. What is the intermediary's one-month liquidity index?
Hint:
where
wi = weights of the portfolio based on the face value of the assets,
Pi = fire-sale price of asset i
Pi* = anticipated values in one year of asset i
Group of answer choices
0.93
0.91
0.90
0.92
0.89
A financial intermediary has two assets in its investment portfolio. It has 35 percent of its security portfolio invested in one-month Treasury bills and 65 percent in real estate loans. If it liquidated the bills today, the bank would receive $98 per hundred of face value. If the real estate loans were sold today, they would be worth $80 per 100 of face value. In one month, the real estate loans could be liquidated at $95 per 100 of face value. What is the intermediary's one-month liquidity index? Hint: 12 I= WP P where w; = weights of the portfolio based on the face value of the assets, P;= fire-sale price of asset i P:* = anticipated values in one year of asset i O 0.93 0.91 0.90 O 0.92 O 0.89Step by Step Solution
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