Statement C is false (and therefore the correct answer). If a bank's primary goal is to minimize risk, an asset liquidity strategy is safer than a borrowed liquidity strategy. A borrowed liquidity strategy (liability management) entails raising funds in the money markets, exposing the bank to interest rate volatility and the risk that credit may not be available when needed (especially during financial stress). An asset liquidity strategy relies on holding and selling highly liquid assets, which involves much lower risk.

Statements A, B, and D are true.

• A: True. A liquid asset must be easily reversible with a reasonably stable price and a ready market.
• B: True. Asset conversion involves selling assets, which shrinks the balance sheet. Borrowing liquidity preserves the size of the balance sheet.
• D: True. A balanced liquidity strategy combines both approaches, managing the opportunity cost of holding low-yield liquid assets against the interest rate and credit availability risks of borrowed funds.