Which of the following statements, if any, is (are) true?
(i) mutual funds never have runs.
(ii) funds invested with insurers are as safe as deposits at a bank.
(iii) pension funds generally have less liquidity risk than banks."

a. all three are true.
b. only i is true.
c. only ii and iii are true.
d. only iii is true.
e. none are true.

The answer would be C

Explanation:

When it comes to considering life insurance as an investment, you’ve probably heard the adage, “Buy term and invest the difference.” This advice is based on the idea that term life insurance is the best choice for most individuals because it is the least expensive type of life insurance and leaves money free for other investments.

Permanent life insurance, the other major category of life insurance, allows policyholders to accumulate cash value, while term does not, but there are expensive management fees and agent commissions associated with permanent policies, and many financial advisors consider these charges a waste of money.

When you hear financial advisers and, more often, life insurance agents advocating for life insurance as an investment, they are referring to the cash-value component of permanent life insurance and the ways you can invest and borrow this money.

There are many arguments in favor of using permanent life insurance as an investment. The issue is, these benefits aren’t unique to permanent life insurance. You often can get them in other ways without paying the high management expenses and agent commissions that come with permanent life insurance.

Liquidity risk is one of the major risks faced by financial entities (such as banks, insurance companies and pension funds) and one of the primary causes of the 2008 financial crisis. Yet many entities with financial exposure cannot quantify the liquidity risks to which they are exposed.

In layman’s terms, liquidity risk can be described as the risk that arises from being unable to sell an asset in a timely manner and for its “true value.” There are two key dimensions of liquidity risk: one, the time required to transact in an asset, and two, the price at which the asset can be bought or sold.

Option D is correct

Explanation:

Liquidity risk in pension funds is less because they only face one possibility of liquidity which happens when cash flow out due pension servicing of retirees is higher than cash flow in due to numbers of active members.

Whole liquidity in banking can come from so many sources like high number of bad loans, bank scare situations were a lot of cash is withdrawn and closing of numerous accounts at the same time.

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