Consider the Following Situation: an FI Holds Two Assets in Equal

Multiple Choice

Consider the following situation: an FI holds two assets in equal proportions, these being liquid securities with a fair market value of $200 and housing loans with a fair market value of $800.Further assume that in case of immediate liquidation, the FI would receive $185 for its liquid securities and $700 for its housing loans.What is the FI's liquidity index (round to two decimals) ?

A) I = (185/200) + (700/800) = 1.80
B) I = (185/200) * (700/800) = 0.81
C) I = 0.5 * (185/200) + 0.5 * (700/800) = 0.90
D) I = [0.5 * (185/200) ] * [0.5 * (700/800) ] = 0.20