With regard to asset transformation, financial intermediaries are able to provide deficit units with diverse loan products and at the same time satisfy the varying preferences of investors offering them a range of deposit products. Question 3Select one: True False

The example of asset transformation function of financial institutions is Group of answer choicestransferring of funds from one generation to another.investing short-term funds in off-balance sheet activities.transforming short term sources of funds into long term investments by taking short term deposits to fund long term loans.receipt of securities through electronic payments systems.

Asset transformation can be described asA) borrowing long and lending short.B) borrowing short and lending long.C) borrowing and lending only for the short term.D) borrowing and lending for the long term

A financial asset is recognised whenAnswer : risks and rewards are transferred  it is probable that future economic benefits will flow to the entity and the cost of the instrument can be measured reliably   control is obtained   the entity becomes a party to a contractual provision of the instrument

The asset transformation function can explain the situation that A.banks can operate at a low level of financial leverage.B.the liability structure of bank balance sheets tends to reflect a shorter maturity structure than does the asset structure.C.the use of off-balance-sheet activities will always reduce the risk to commercial banks.D.FIs can offer trust services. E.FIs can provide transaction services as well as advisory services to their customers.

Which of the following is a financial asset?Answer : Machinery  Intangible assets   Loan receivable  Prepayments