Question
AMNC bank is going to estimate liquidity requirements today. It has reviewed its deposit accounts thoroughly and classified them as explained in the table below
AMNC bank is going to estimate liquidity requirements today. It has reviewed its deposit accounts thoroughly and classified them as explained in the table below
Millions of Dollars | Checkable Deposits | Savings Deposits | Time Deposits |
Hot Money Funds | 50 | 50 | 1000 |
Vulnerable Funds | 30 | 200 | 800 |
Stable(Core Funds) | 20 | 400 | 200 |
Management should hold a 5% reserve for its holdings of stable funds, a 15 % reserve for vulnerable deposits and an 80% percent reserve in liquid assets for each dollar of hot money deposits.
Assume time deposits carry a zero percent legal reserve requirement and all checkable and savings deposits carry a 10 percent legal reserve requirement. AMNC currently has total loans outstanding of $1500 million which recently reached $1800 million. Its loans indicate annual growth rate over the past five years has been about 6%.
What is AMNC's total liquidity requirement?
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