Consider the simple FI balance sheet below (in millions of dollars). Suppose that depositors unexpectedly withdraw $50
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Consider the simple FI balance sheet below (in millions of dollars).
Suppose that depositors unexpectedly withdraw $50 million in deposits and the FI receives no new deposits to replace them. Assume that the FI cannot borrow any more funds in the short-term money markets, and because it cannot wait to get better prices for its assets in the future (as it needs the cash now to meet immediate depositor withdrawals), the FI has to sell any nonliquid assets at 75 cents on the dollar. Show the FI’s balance sheet after adjustments are made for the $50 million of deposit withdrawals.
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Related Book For
Financial Institutions Management
ISBN: 9780078034800
8th Edition
Authors: Anthony Saunders, Marcia Cornett
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