T for liquidity_ans_1

# T for liquidity_ans_1 - TUTORIAL FOR LIQUIDITY AND...

This preview shows pages 1–2. Sign up to view the full content.

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.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 2

T for liquidity_ans_1 - TUTORIAL FOR LIQUIDITY AND...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online