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Q.4213 Use the matched-maturity marginal cost of funds approach to calculate the cost of funding liquidity risk given that a four-year amortizing loan has annual liquidity premiums of 12, 17, 24, 30, respectively. | Financial Risk Manager Part 2 Quiz - LeetQuiz

Explanation:

\frac{(\text{Term in year 1} \times \text{Term liquidity premium}) + (\text{Term in year 2} \times \text{Term liquidity premium}) + \cdots (\text{Term in year n} \times \text{Term liquidity premium})}{\text{Term in year } (1 + 2 + 3 + \dots + n)}

\frac{(1 \times 12) + (2 \times 17) + (3 \times 24) + (4 \times 30)}{(1 + 2 + 3 + 4)} = 23.8 \text{bps}

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Q.4213 Use the matched-maturity marginal cost of funds approach to calculate the cost of funding liquidity risk given that a four-year amortizing loan has annual liquidity premiums of 12, 17, 24, 30, respectively.

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