Why is too much liquidity not a good thing? | Homework.Study.com (2024)

Get access to this video and our entire Q&A library

• Why is it important to have sufficient liquidity during a weak economy?
• Why is liquidity risk a problem for banks?
• What is a disadvantage of maintaining a very high level of liquidity?
• What are the two reasons liquidity risk arises?
• What does liquidity mean?
• Why do mutual funds face liquidity risk?
• What is the difference between solvency and liquidity?
• Why is LIBOR important in financial market?
• Since the mid-1960s, corporate liquidity has been declining. What reasons can you give for this trend?
• Why is cash management important?
• Which are the liquidity ratios?
• What is the difference between liquidity and liquidation?
• Why do financial institutions fear the liquidity trap when negative interest rates can exist?
• Why does bitcoin go up in value?
• Why does cash that is kept out of the financial system lose its real value over time?
• Why are there no substantial American bitcoin exchanges?
• How do money markets help in managing liquidity in financial systems?
• What happens if a financial market has high volatility and low liquidity?
• Why is investing in cryptocurrencies better than stocks?
• Why is it necessary to invest 15% of the debenture redemption amount?
• What is true with respect to spot market liquidity?
• Why would firms hold large quantities of cash?
• Discuss how commercial banks manage liquidity.
• Why would an exchange offer a futures contract with cash settlement?
• Why do businesses use the money markets?
• Why are people still talking about "investing" in cryptocurrencies?
• Why do some commercial banks issue bonds?
• Why are Yes Bank shares falling, and what is a good time to accumulate?
• Why is a debenture redemption investment created?
• Why doesn't everyone do arbitrage on the stock market if it is risk-free?
• Why don't we all have the same currency and what are the effects for the economy and financial markets, if yes?
• Why should I put my money in an actively-managed fund?
• Why would investors purchase junk bonds?
• If you had $30,000 dollars, would you invest it in Bitcoin right now, and why or why not?
• How do money markets provides liquidity for the global financial system?
• Why are the interest rates of micro finance institutions higher than those of banks?
• Why aren't the people who are sure Bitcoin is going to go very high in value investing very aggressively in it?
• Why do banks not eliminate the need for money markets?
• Why, in a financial system, is an absolute-zero risk not desirable?
• How can businesses prevent building the risk of liquidity?
• Explain how the liquidity position of finance companies differs from that of depository institutions such as commercial banks.
• People say now is a good time to invest in Bitcoin, why am I just not seeing that?
• What would be the benefit of gambling using crypto currencies like Bitcoin?
• What are the arguments in favor of investing in Bitcoin and against?
• Why would it not be a good idea if the government completely controlled the money supply?
• What is the reason why savers use financial intermediaries?
• What are the best reasons you think someone should invest in cryptocurrency/assets?
• Why are many debt mutual funds going down, although lesser than equity MFs, when the market goes down?
• Explain why the credit crisis caused a lack of liquidity in the secondary markets for many types of debt securities. Explain how such a lack of liquidity would affect the prices of the debt securities
• Why would a hedge fund ever want to buy distressed securities?
• Why should one look to invest in Bitcoin or cryptocurrency? Is there a definite upside or can it completely crash someday?
• Why invest in mutual funds?
• Why are Eurocredits not extended by one bank but by a large syndicate of banks?
• How do broker-dealers supply liquidity to the market?
• Why does the stock market fall when the economy is apparently good?
• Why do investors invest in stocks?
• Why are mutual funds subject to market risk?
• Why are micro-finance institutions more profitable than traditional banks?
• What is Libor, and what are Eurodollars? How do they relate to each other, and what role do they play in the global markets for liquidity?
• Why do people think that a Bitcoin investment is good? It seems to have 0 intrinsic value.
• Primarily, why is a typical bank exposed to interest-rate risk?
• Why and how do central banks intervene in foreign exchange markets under the managed floating exchange rate system?
• 1) The determination of cash requirements is closely associated with a bank's liquidity requirements. Explain why. 2) What are the advantages and disadvantages of a bank holding more cash? 3) What a
• Why would negative interest rates erode bank profits?
• What are some reasons to use cash for purchases rather than credit?
• Why is it more expensive to place equity than debt?
• (a) How can finance companies manage their interest rate, liquidity, and credit risks? (b) What are their advantages or disadvantages vis-a-vis depository institutions?
• Why doesn't a bitcoin debit card exist?
• Why would a firm use an interest rate swap as part of its financing strategy?
• Who takes liquidity and who provides liquidity in risk-on risk-off trading?
• Why is ripple not increasing like bitcoin, when it has a real value, and it just invested in Moneygram?
• Why would I leave my securities with a custodian bank?
• Why is Negative Interest Rate Policy (NIRP) a bad idea?
• Why is the Sensex soaring after the Budget even if there is nothing favorable for the industry or market?
• Why do financial markets exist?
• Why is there so much title inflation in financial services?
• What investments should you consider to achieve liquidity and an adequate return?
• What would be the benefits of having a Bitcoin over a dollar?
• Why are banks exempted from creating a debenture redemption reserve?
• Why have large money center banks' noninterest income levels typically been higher than those of smaller banks?
• What is the purpose of serial repayments and sinking funds?
• What are the potential benefits of a pegged currency system?
• Why should I invest via Wealthfront instead of E*Trade?
• Why would an investor purchase a convertible bond or a high-yield bond?
• Can somebody explain mathematically why it is so hard to average over ten percent annually when trading financial markets?
• Why do some investors purchase load funds?
• Why do we invest in financial institutions like UTI?
• Why is stochastic calculus used in finance?
• What is LIBOR? Explain briefly.
• Why junk bonds are often not rated? Explain.
• Explain why banks are inherently unstable. What is there about "making loans and taking deposits" that makes bank runs possible at almost any time without government backup?
• Explain why someone with a large portfolio of fixed-income investments would fear inflation.
• Historically, what has been more important for the stability of financial institutions, capital or liquidity?
• Why are Bitcoins more unstable than fiat currencies like the USD?
• Explain the LIBOR rate.
• Why are bank stocks so cheap as of 2018? Their forward P/E are well below market value of say, forward P/E of 20. Most of them trading below a P/E of 10
• Why have banks been losing cost advantages in acquiring funds in recent years?
• How is the liquidity problem faced by investment funds different from that faced by DIs and insurance companies?
• Why do banks lend money to households at 1-7% interest rate when they can get 15%+ returns on the stock market?