Consider the balance sheet for the DI listed below Assets Cash Securities Loans Total assets Liabilities and equity $5 Deposits 20 Equity 50 Total liabilities and equity $75 $68 7 b) The stored liquidity management is used to meet the liquidity shortfall. $75 The DI is expecting a $15 million net deposit drain. Show the DI's balance sheet under these two conditions: a) The DI purchases liabilities to offset this expected drain. c) Bank D.U reported a debt to equity ratio of 11 at the end of year 2022. If the 'bank's total assets at the end of year 2022 was $34 million, how much of its assets were financed with equity? d) If the Swiss Franc to U.S. Dollar is expected to appreciate in the near future, would a U.S. bank in Basel, Switzerland, prefer to be net long or net short in its asset positions? Please also explain the reasons.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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C & D ONLY

Consider the balance sheet for the DI listed below
Assets
Cash
Securities
Loans
Total assets
Liabilities and equity
$5 Deposits
20 Equity
50 Total liabilities and equity
$75
$68
7
b) The stored liquidity management is used to meet the liquidity shortfall.
$75
The DI is expecting a $15 million net deposit drain. Show the DI's balance sheet under
these two conditions:
a) The DI purchases liabilities to offset this expected drain.
c) Bank D.U reported a debt to equity ratio of 11 at the end of year 2022. If the 'bank's
total assets at the end of year 2022 was $34 million, how much of its assets were
financed with equity?
d) If the Swiss Franc to U.S. Dollar is expected to appreciate in the near future, would
a U.S. bank in Basel, Switzerland, prefer to be net long or net short in its asset
positions? Please also explain the reasons.
Transcribed Image Text:Consider the balance sheet for the DI listed below Assets Cash Securities Loans Total assets Liabilities and equity $5 Deposits 20 Equity 50 Total liabilities and equity $75 $68 7 b) The stored liquidity management is used to meet the liquidity shortfall. $75 The DI is expecting a $15 million net deposit drain. Show the DI's balance sheet under these two conditions: a) The DI purchases liabilities to offset this expected drain. c) Bank D.U reported a debt to equity ratio of 11 at the end of year 2022. If the 'bank's total assets at the end of year 2022 was $34 million, how much of its assets were financed with equity? d) If the Swiss Franc to U.S. Dollar is expected to appreciate in the near future, would a U.S. bank in Basel, Switzerland, prefer to be net long or net short in its asset positions? Please also explain the reasons.
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