Use the following balance sheet to answer questions 5-8 ($000) Cash 21 Demand Deposits 550 Securities 369 Fed Funds (Borrowings) 151 Loans 400 Equity 89 5. If the bank’s expected net deposit drain is 4%, what is the bank’s expected liquidity needs? 6. How can the bank meet an expected net deposit drain of 4%? 7. ) If the bank decides to cut down on interest expenses by reducing its dependence upon borrowed funds, what policy must the bank follow? 8. ) If the bank experience a $50,000 sudden liquidity drain, what will be the impact on the bank’s balance sheet?
Use the following balance sheet to answer questions 5-8 ($000) Cash 21 Demand Deposits 550 Securities 369 Fed Funds (Borrowings) 151 Loans 400 Equity 89 5. If the bank’s expected net deposit drain is 4%, what is the bank’s expected liquidity needs? 6. How can the bank meet an expected net deposit drain of 4%? 7. ) If the bank decides to cut down on interest expenses by reducing its dependence upon borrowed funds, what policy must the bank follow? 8. ) If the bank experience a $50,000 sudden liquidity drain, what will be the impact on the bank’s balance sheet?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Use the following balance sheet to answer questions 5-8
($000)
Cash 21 Demand Deposits 550
Securities 369 Fed Funds (Borrowings) 151
Loans 400 Equity 89
5. If the bank’s expected net deposit drain is 4%, what is the bank’s expected liquidity needs?
6. How can the bank meet an expected net deposit drain of 4%?
7. ) If the bank decides to cut down on interest expenses by reducing its dependence upon borrowed funds, what policy must the bank follow?
8. ) If the bank experience a $50,000 sudden liquidity drain, what will be the impact on the bank’s balance sheet?
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