The risk of financial institutions which states the mismatching asset maturities and liability maturities, is classified as _____________?
Correct answer: B. maturity intermediation
- A. selling intermediation
- B. maturity intermediation
- C. direct intermediation
- D. indirect intermediationGet Study Guides
Explanation
Maturity intermediation occurs when a financial institution accepts liabilities with one maturity pattern and invests in assets with different maturities. The mismatch creates maturity risk, unlike direct or indirect intermediation, which describe how funds are channelled.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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