An investment bank specializing in fixed-income assets has the following balance sheet (in millions). Amounts are in market values and all interest rates are annual unless indicated otherwise.

a. Does the investment bank have sufficient liquid assets per the net capital rule? Is the investment bank in compliance with SEC Rule 15C 3–1?

b. Assume that rates on all assets rise 15 basis points and on all liabilities rise 25 basis points (per year). Will the FI be in compliance with SEC Rule 15C 3–1?

c. How does the net capital rule for investment banks differ from the capital requirements imposed on depository institutions?

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Cash Assets 8%, 10-year Treasury notes semiannual (par = $16.0) Total assets Liabilities and Equity $ 0.5 15.0 5%, 1-year eurodollar deposits 6%, 2-year subordinated debt (par = $9.5) $ 5.0 9.5 Equity 1.0 15.5 Total liabilities and equity 15.5