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1. Consider the simple Fl balance sheet below (in millions of dollars): Assets Liabilities/Equity Cash assets $50 Deposit $200 Nonliquid assets $225 Equity $75 $275

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1. Consider the simple Fl balance sheet below (in millions of dollars): Assets Liabilities/Equity Cash assets $50 Deposit $200 Nonliquid assets $225 Equity $75 $275 $275 Hints: Similar to Q4 in Sample Calculation Problems_Ch07.pptx". Suppose that depositors unexpectedly withdraw $75 million in deposits and the Fl receives no new deposits to replace them. Assume that the Fl 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 Fl has to sell any nonliquid assets at 50 cents on the dollar. Show the Fls balance sheet after adjustments are made for the $75 million of deposit withdrawals. (6 points)

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