Suppose that Davenport Savings and Loans has the following balance sheet items: $$67$ million in

checkable deposits, $$42$ million in loans, $$23$ million in securities$,$ $$10$ million in bank capital and $$12$

million in total reserves. Assume that the reserve requirement ratio is $12\%.$

$($a$)$ Complete the balance sheet for Davenport Savings and Loans. $[5$ Points$]$

$($b$)$ Suppose that Robiye, the richest woman in Davenport, withdraws $$6$ million from her checking

account held at Davenport Savings and Loans. Illustrate the new balance sheet for Davenport Savings

and Loans immediately after the deposit outflow. What happens to total reserves? What is the problem

that is faced by Davenport Savings and Loans? $[6$ Points$]$

$($c$)$ List three options that Davenport Savings and Loans can adopt to meet its shortfall in reserves. What

are the costs associated with each of the options listed? $[6$ Points$]$

$($d$)$ Prior to the creation of the Federal Deposit Insurance Corporation $($FDIC$)$ in $1934,$ there was no

federal deposit insurance. Would liquidity management have been of greater or lesser concern to banks

during those years? Briefly explain. $[5$ Points$]$