Question
A. Consider the assets of two banks, A and B. Each bank is funded by $140 million in deposits and $30 million in equity. i.
- A. Consider the assets of two banks, A and B. Each bank is funded by $140 million in deposits and $30 million in equity.
i. Which bank has the stronger liquidity position? (1 mark)
ii. Which bank probably has a higher profit? (1 mark)
Bank A Asset (Millions) | Bank B Asset (Millions) |
Cash $30 | Cash $15 |
Consumer loans $35 | Treasury securities $50 |
Commercial loans $105 | Commercial loans $105 |
Total Assets $170 | Total assets $170 |
B. Why are Treasury securities considered good examples of liquid assets? [1 mark]
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Financial Accounting
Authors: Robert Kemp, Jeffrey Waybright
3rd Edition
133427889, 978-0133427882
