Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please use the balance sheet to answer the followingn questions, and show all work. thank you! Use the following balance sheet (values in thousands of

please use the balance sheet to answer the followingn questions, and show all work. thank you! image text in transcribed
image text in transcribed
Use the following balance sheet (values in thousands of dollars) to answer questions 6-10 Assets Cash Required Reserves Short-term Securities Loans Liabilities and Equity Demand Deposits Fed Funds Borrowed Equity 21 369 400 550 151 Total 790 Total 790 8. What are the possible ways that the bank can meet an expected net deposit drain of 4% using stored liquidity management techniques? A. Liquidate all cash holdings B. Utilize further the Fed funds market. C. Liquidate some securities and/or loans. D. Liquidate all cash and use more Fed funds. E. All of the above are suitable techniques. 9. If the bank decides to cut down on interest expenses by reducing its funds, what policy must the bank follow? dependence upon borrowed B. C. D. E. Manage liquidity risk exclusively through asset management. Manage liquidity risk exclusively through liability management. Reduce the bank's dependence upon demand deposits. Increase interest income by increasing lending. Increase interest income by increasing securities holdings. 10. If the bank experiences a $50,000 sudden liquidity drain caused by a loan commitment draw down, what will be the impact on the balance sheet if stored liquidity management techniques are used A. A reduction in cash of $21,000 and an increase in demand deposits of $29,000. B. A reduction in securities and/or current loans totaling $50,000. C. A reduction in cash of $21,000 and a decrease in securities holdings of $29,000. D. A decrease in equity of $50,000. E. A decrease in lending of $50,000

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting Tools for business decision making

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

6th Edition

978-0470477144, 1118096894, 9781118214657, 470477148, 111821465X, 978-1118096895

More Books

Students also viewed these Accounting questions