Queen Savings is attempting to determine its liquidity requirements today (the last day in August) for the month of September. September is usually a month of heavy loan demand due to the beginning of the school term and the buildup of business inventories of goods and services for the fall season and winter. This thrift institution has analyzed its deposit accounts thoroughly and classified them as explained below.

Management has elected to hold a 85 % reserve in liquid assets or borrowing capacity for each dollar of hot money deposits, a 25 % reserve behind vulnerable deposits, and a 5 % reserve for its holdings of core funds. Assume time and savings deposits carry a 0 % reserve requirement and all checkable deposits carry a 3 % reserve requirement. Queen currently has total loans outstanding of $2,500 million, which two weeks ago were as high as $2,550 million. Its loans indicate annual growth rate over the past three years has been about 6 %. Carefully prepare low and high estimates for Queens total liquidity requirement for September.

Millions of Dollars Checkable Deposits Savings Deposits Time Deposits

Hot money funds $10 $ 5 $1,200

Vulnerable funds 65 152 740

Stable (core) funds 85 450 172