Question

An FI has the following Balance Sheet (in millions of dollars): Assets : Cash $80 Deposits...

An FI has the following Balance Sheet (in millions of dollars):

Assets : Cash $80 Deposits $270 Loans $200 Securities $20

Liabilities and Equity : Deposits $270 Equity $30

The bank is expecting a $100 million net deposit drain. Show the FI's new balance sheet if the bank uses Stored Liquidity method is used to meet the liquidity shortfall.

Homework Answers

Answer #1

I have answered the question below

Please up vote for the same and thanks!!!

Do reach out in the comments for any queries

Answer:

The Stored Liquidity method is used to meet the liquidity shortfall.

The $ 100 million drain reflects on the deposits and cash and securities are used to meet this. (Cash $ 80 mln and securities $ 20 mln)

FI's new balance sheet:

Assets                                   Liabilities and Equity   

Loans   $200   Equity $30

Deposits          $ 170

Total Assets $200 Total liabilities and equity $ 200

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Your bank has the following balance sheet: Assets Liabilities Reserves $50 millions.   Checkable deposits $200 million....
Your bank has the following balance sheet: Assets Liabilities Reserves $50 millions.   Checkable deposits $200 million. Securities $50 million    Loans $150 Bank If the required reserve ratio is 20%, what will be the size of this bank (as measured by its total assets or liabilities) after $20 million deposit outflow if it just meets reserve deficiency by borrowing money? $206 million. $180 million $210 million. $188 million.
(3.) Consider the following bank balance sheet: Assets (in millions) Liabilities (in millions) Reserves $50 Demand...
(3.) Consider the following bank balance sheet: Assets (in millions) Liabilities (in millions) Reserves $50 Demand Deposits $200 Securities $50 Equity (in millions) Loans $150 Equity Capital $50 (a.) Suppose that this bank is subject to a 10.00% required reserve ratio. Is this bank holding any excess reserves? If so, how much? (b.) Suppose that this bank experiences a $35 million deposit out?ow. By how much is this bank short of its reserve requirements?
In the following bank balance sheet, amounts are in millions of dollars. The required reserve ratio...
In the following bank balance sheet, amounts are in millions of dollars. The required reserve ratio is 3% on the first $30 million of checkable deposits and 12% on any checkable deposits over $30 million. Assets Liabilities Reserves $18.9 Checkable deposits $180.0 Loans 150.0 Net worth 20.0 Securities 31.1 Calculate the bank’s excess reserves. (10 points) Suppose that the bank sells $5 million in securities to get new cash. Show the bank’s balance sheet after this transaction. What are the...
5)   A financial institution has the following balance sheet. Assets (millions) Liabilities Cash $15 Deposits 115...
5)   A financial institution has the following balance sheet. Assets (millions) Liabilities Cash $15 Deposits 115 Securities 50 Equity 35 Loans 85 Total 150 Total 150 a)   If the bank regulators require banks to maintain at least 10% of its capital structure as equity, what is the largest loss the bank could take on the securities and still be in compliance? b)         Explain why this requirement caused so many problems in
ASSETS LIABILITIES CASH 10 DEPOSITS 30 LOANS 40 EQUITY 20 A bank with the balance sheet...
ASSETS LIABILITIES CASH 10 DEPOSITS 30 LOANS 40 EQUITY 20 A bank with the balance sheet above is met with a sudden drop in deposits of $20 due to financial problems. The bank can sell a portion of their loan portfolio for $0.50 on the dollar. The bank earns 8% on their loans, and pays 4% on their deposits. The bank can borrow money at 6%. 2. What does the bank’s balance sheet look like if it addresses the drop...
Your bank has the following balance sheet: Assets                                  
Your bank has the following balance sheet: Assets                                           Liabilities                                           Reserves               $50 million     Checkable deposits     $200 million Securities             50 million       Loans                    150 million     Bank capital                50 million       If the required reserve ratio is 10%, what actions should the bank manager take if there is an unexpected deposit outflow of $50 million?
A Bank has the following balance sheet (in millions) and has no off-balance-sheet activities Assets Liabilities...
A Bank has the following balance sheet (in millions) and has no off-balance-sheet activities Assets Liabilities and Equity Treasury Bills 30 Deposits 980 Long-term Treasury securities 10 Subordinated bonds 20 Residential mortgages 600 Convertible bonds 20 Commercial loans (AA+ rated) 105 Perpetual preferred stock (nonqualifying) 5 Business loans (BB+ rated) 210 Perpetual preferred stock (qualifying) 10 Commercial loans (CCC+ rated) 130 Common stock 40 Cash 20 Retained Earnings 30 Total Assets 1,105 Total liabilities and equity 1,105 What are the...
(1.) Suppose you are a manager of a bank with the following balance sheet: Assets (in...
(1.) Suppose you are a manager of a bank with the following balance sheet: Assets (in millions) Liabilities (in millions) Reserves $30 Checkable Deposits $200 Securities $150 Time Deposits $600 Loans $820 Borrowings $100 Suppose you are required to hold 10.00% of checkable deposits as reserves with the central bank. If you were faced with an unexpected withdrawal of $30 million from time deposits, would you rather: • I. Draw down $10 million of excess reserves and borrow the remain...
The bank you own has the following balance sheet:    Assets      Liabilities Reserves   $75 million   ...
The bank you own has the following balance sheet:    Assets      Liabilities Reserves   $75 million    Deposits      $500 million Loans $525 million    Bank Capital    $100 million If the president of a bank told you that the bank was so well run that it has never had to call in loans, sell securities, or borrow as a result of a deposit outflow, would you be willing to buy stock in that bank? Why or why not?
Megalopolis Bank has the following balance sheet and income statement. Balance Sheet (in millions) Assets Liabilities...
Megalopolis Bank has the following balance sheet and income statement. Balance Sheet (in millions) Assets Liabilities and Equity Cash and due from banks $ 9,800 Demand deposits $ 27,000 Investment securities 31,000 NOW accounts 97,000 Repurchase agreements 50,000 Retail CDs 36,000 Loans 98,000 Debentures 27,000 Fixed assets 23,000 Total liabilities $ 187,000 Other assets 4,800 Common stock 12,000 Paid-in capital 4,000 Retained earnings 13,600 Total assets $ 216,600 Total liabilities and equity $ 216,600 Income Statement Interest on fees and...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT