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A bank's treasurer is currently examining different methodologies for pricing liquidity and is concerned about the potential impacts associated with each method. To address these concerns, the treasurer has tasked an analyst with the responsibility of investigating and evaluating the various approaches used for pricing the transfer of liquidity. The analyst is expected to analyze these methods thoroughly and prepare a comprehensive report that includes well-founded recommendations.
A
A zero-cost of funds approach tends to result in the bank holding long-term highly illiquid assets funded by long-term stable liabilities
B
An average cost of funds approach tends to result in the greatest maturity transformation for a bank's balance sheet.
C
A matched-maturity marginal cost of funds approach converts the bank's fixed-rate borrowing cost to a floating-rate borrowing cost.
D
Both an average cost of funds approach and a zero-cost of funds approach appropriately align the maturity of the bank's lending and borrowing activities when management compensation is based on net income.