Answered

A bank currently has $150 million in "hot money" deposits against which it wants to hold an 80 percent reserve and $90 million in vulnerable deposits against which it wants to hold a 30 percent reserve. It also has $45 million in stable deposits against which it wants to hold a 5 percent reserve. Legal reserves for the bank are 5 percent of all deposits. What is the bank's liability liquidity reserve?

Answer :

Cricetus

Answer:

The right response is "141.7875".

Explanation:

According to the question,

The total reserves held will be:

=  [tex]0.8\times 150+0.3\times 90+0.05\times 45[/tex]

=  [tex]120+27+2.25[/tex]

=  [tex]149.25[/tex]

Deductions will be:

=  [tex]5 \ percent \ of \ 149.25[/tex]

=  [tex]0.05\times 149.25[/tex]

=  [tex]7.4625[/tex]

now,

The bank's liability liquidity reserve will be:

=  [tex]Total \ reserves \ held-Deductions[/tex]

=  [tex]149.25-7.4625[/tex]

=  [tex]141.7875[/tex]

Other Questions