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a) Assume a bank only has three assets listed below and plans to liquidate these assets. We list their face values, liquidation values today, and their anticipated liquidation values one year from now (their fair market values). Current liquidation Asset Treasury bills Short-term bonds Face value value $110,000 $30,000 $125,000 20,000 60,000 Long-term bonds 100,000 80,000 170,000 Calculate the one-year liquidity index for these assets. Please show each step of your calculation. One-year liquidation 30,000 value

a) Assume a bank only has three assets listed below and plans to liquidate these assets. We list their face values, liquidation values today, and their anticipated liquidation values one year from now (their fair market values). Current liquidation Asset Treasury bills Short-term bonds Face value value $110,000 $30,000 $125,000 20,000 60,000 Long-term bonds 100,000 80,000 170,000 Calculate the one-year liquidity index for these assets. Please show each step of your calculation. One-year liquidation 30,000 value

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A & B ONLY

a) Assume a bank only has three assets listed below and plans to liquidate these assets. We list their face values, liquidation values today, and their anticipated liquidation values one year from now (their fair market values). Current liquidation Asset Face value $30,000 20,000 value 100,000 Treasury bills Short-term bonds Long-term bonds 170,000 Calculate the one-year liquidity index for these assets. Please show each step of your calculation. $110,000 30,000 One-year liquidation 80,000 value $125,000 60,000 b) Please explain the difference between technology risk and operational risk. Please also include examples in your explanation. c) Evaluate the following statement: "Off-balance-sheet (OBS) activities generate many benefits to a bank and thus the OBS activities are not risky for a bank". d) Based on banks' asset size, commercial banks are divided into retail banks and wholesale banks. Explain the differences between retail banks and wholesale banks.
Transcribed Image Text:a) Assume a bank only has three assets listed below and plans to liquidate these assets. We list their face values, liquidation values today, and their anticipated liquidation values one year from now (their fair market values). Current liquidation Asset Face value $30,000 20,000 value 100,000 Treasury bills Short-term bonds Long-term bonds 170,000 Calculate the one-year liquidity index for these assets. Please show each step of your calculation. $110,000 30,000 One-year liquidation 80,000 value $125,000 60,000 b) Please explain the difference between technology risk and operational risk. Please also include examples in your explanation. c) Evaluate the following statement: "Off-balance-sheet (OBS) activities generate many benefits to a bank and thus the OBS activities are not risky for a bank". d) Based on banks' asset size, commercial banks are divided into retail banks and wholesale banks. Explain the differences between retail banks and wholesale banks.
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