Prudent commertial bank is trying to estimate the liquidity requirements today (last day of February) for the month of March. Assume legal reserve requirements are 5%. Currently the bank's total deposits are sooo million and are expected to grow by 8 percent during the month of March. The bank has estimated that 20% of the total deposits are hot money deposits. 30% are vulnerable deposits and the rest are stable (core) deposits. The liquidity manager would like to keep a liquidity reserve of 80% for hot money. 35% liquidity reserve for vulnerable deposits and 1o% Tiquidity reserve for core deposits. Currently the bank's total loans are at 4000 million. The bank expects a 400 million reduction in the level of loans during March

Prudent commertial bank is trying to estimate the liquidity requirements today (last day of February) for the month of March. Assume legal reserve requirements are 5%. Currently the bank's total deposits are sooo million and are expected to grow by 8 percent during the month of March. The bank has estimated that 20% of the total deposits are hot money deposits. 30% are vulnerable deposits and the rest are stable (core) deposits. The liquidity manager would like to keep a liquidity reserve of 80% for hot money. 35% liquidity reserve for vulnerable deposits and 1o% Tiquidity reserve for core deposits. Currently the bank's total loans are at 4000 million. The bank expects a 400 million reduction in the level of loans during March

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Monetary System

Section: Chapter Questions

Problem 6PA

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Question

Prudent commertial bank is trying to estimate the liquidity requirements today (last day of February) for the month of
March. Assume legal reserve requirements are s%.
Currently the bank's total deposits are sooo million and are expected to grow by 8 percent during the month of March.
The bank has estimated that 20% of the total deposits are hot money deposits, 30% are vulnerable deposits and the
rest are stable (core) deposits.
The liquidity manager would like to keep a liquidity reserve of 8o% for hot money, 35% liquidity reserve for vulnerable
deposits and 10% Tiquidity reserve for core deposits.
Currently the bank's total loans are at 4000 million. The bank expects a 400 million reduction in the level of loans during
March

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