The liquidity of bank assets:

a$.$ Rank the following bank assets from most to least liquid: physical capital, securities$,$ reserves, mortgage loans.

b$.$ Why are mortgage loans more$/$less liquid than securities$?$

What is the difference between the discount rate and the federal funds rate? Which is larger?

Consider the following bank:

$\backslash$table$[[$Assets$,$Liabilities$],[$Reserves$,$$$75$ million,Deposits $,$$$500$ million,$],[$Loans$,$$$525$ million,Bank capital $$100$ million,$]]$

a$.$ The bank suffers a deposit outflow of $$50$ million with a required reserve ratio of $10\%.$ Set up the bank's balance sheet after the deposit outflow.

b$.$ After the deposit outflow, what is the level of required reserves? Does the bank have enough reserves to meet these reserve requirements?

$4.$ Consider a bank with the following assets and liabilities on its balance sheet: $90$ in Treasury bonds; $30$ in reserves; $200$ in checkable deposits; and $100$ in mortgage loans to households. The required reserve ratio is $10\%.$

a$.$ Set up the balance sheet. Rank assets from least to most liquid, and don't forget capital.

b$.$ What is the maximum level of deposit withdrawals that this bank can withstand, and still meet its reserve requirements.

c$.$ There is a deposit outflow of $25.$

i$.$ Set up the bank's balance sheet after the deposit outflow.

ii$.$ Is the bank insolvent? Is it illiquid? Why?