T for - TUTORIAL FOR LIQUIDITY AND LIABILITY MANAGEMENT Problem 1 a Cost of the drain = $40,000 The average size of the firm will be $8 million

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TUTORIAL FOR LIQUIDITY AND LIABILITY MANAGEMENT Problem 1 a. Cost of the drain = $40,000. The average size of the firm will be $8 million after the drain. b. Cost of the drain = $30,000. The average size of the firm will be $10 million after the drain. c. Purchasing interest-bearing liabilities may cost significantly more than the cost rate on deposits that are leaving the bank. However, using interest-bearing deposits protects the bank from decreasing asset size or changing the composition of the asset side of the balance sheet. Problem 2. Thus, and assuming that fixed assets will not be disposed on short notice: I = 0.848 Problem 3 I = 0.927 Problem 4. a. Financing Gap = $15 million b. Financing Requirements = $25 million Problem 5 a. What will be the price received by the FI for the loans if they have to be sold in (i) two days and (ii) in four days? Price of loan = $45.03 if sold in two days. Price of loan = $47.42 if sold in four days.
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This note was uploaded on 12/04/2011 for the course FIN 3230 taught by Professor Olgapak during the Spring '11 term at Kazakhstan Institute of Management, Economics and Strategic Research.

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T for - TUTORIAL FOR LIQUIDITY AND LIABILITY MANAGEMENT Problem 1 a Cost of the drain = $40,000 The average size of the firm will be $8 million

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