Question

Choose the statement that is incorrect.

A.Liquid assets include overnight loans made by one bank to other​ banks, U.S. government Treasury​ bills, and commercial bills.
B.Liquid assets are the​ banks' first line of defense if they need reserves.
C.Liquid assets can be sold and instantly converted into cash with virtually no risk of loss.
D.Liquid assets have a higher interest rate than securities.

Answer 1

The statement that is incorrect is D. Liquid assets have a higher interest rate than securities.

Step-by-step explanation:

The statement that is incorrect is D. Liquid assets have a higher interest rate than securities.

Liquid assets refer to assets that can be easily converted into cash without significant risk of loss. This includes overnight loans made by banks to other banks, U.S. government Treasury bills, and commercial bills. These assets serve as the first line of defense for banks if they need immediate reserves.

Liquid assets are preferred by banks because they can be quickly sold and converted into cash when needed. They usually have lower interest rates compared to securities, such as bonds, which carry higher risks and longer maturity periods.