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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

image text in transcribed

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 0.89

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