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ABC Bank approaches the Federal Reserve Bank of Chicago for a discount loan. ABC Bank has $500MM in assets, mostly long-term loans, and $600MM in

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ABC Bank approaches the Federal Reserve Bank of Chicago for a discount loan. ABC Bank has $500MM in assets, mostly long-term loans, and $600MM in liabilities and is experiencing high withdrawal rates on its deposits. The Federal Reserve Bank of Chicago should: a. Grant the loan if ABC Bank provides acceptable collateral. b. Not grant the loan because ABC Bank is both illiquid and insolvent. . c. Grant the loan because ABC Bank is a solvent bank that is experiencing short-term illiquidity. d. None of the above

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