Vidyalelo
Management · Q182

International Finance and Treasury

Graduate and Post Graduate · Management · question 182

Q182

Situation in which claims by financial institutions than claims issued by corporations is more considerable for investors is classified as

A.
asset transformers
Answer
B.
liability transformers
C.
issuing transformers
D.
claiming transformers

Answer: Option A

Solution

Answer: Option A
Solution:
Situation in which claims by financial institutions than claims issued by corporations is more considerable for investors is classified as asset transformers. Asset transformation is the process of creating a new asset (loan) from liabilities (deposits) with different characteristics by converting small denomination, immediately available and relatively risk free bank deposits into loans–new relatively risky, large denomination asset–that are repaid following a set schedule.