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.

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.

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.

The asset transformation function potentially exposes the FI to A.foreign exchange risk.B.interest rate risk.C.technology risk.D.operational risk.E.trading risk.

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

Short-term investments include:Multiple ChoiceNoncurrent assets.Investments in land or other assets not used in operations.Securities that management intends to convert to cash within one year or the operating cycle, whichever is longer, and are readily convertible to cash.Bonds not intended to be converted into cash.Stocks not intended to be converted into cash.