a) Bank A has the following balance sheet (in millions): Assets Cash Securities Loans Total assets $5 10 55 $70 Liabilities and equity Deposits Equity Total liabilities and equity The bank is expecting a $12 million net deposit drain. $62 8 $70

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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a) Bank A has the following balance sheet (in millions):
Assets
Cash
Securities
Loans
Total assets
$5
10
55
$70
Liabilities and equity
Deposits
Equity
Total liabilities and equity
The bank is expecting a $12 million net deposit drain.
$62
8
$70
i) Show the new balance sheet if the bank uses purchased liquidity management to offset the expected
drain. Also, explain the effect on the size and composition of assets and liabilities
ii) Show the new balance sheet if the bank uses stored liquidity management to offset the expected
drain. Also, explain the effect on the size and composition of assets and liabilities.
Transcribed Image Text:a) Bank A has the following balance sheet (in millions): Assets Cash Securities Loans Total assets $5 10 55 $70 Liabilities and equity Deposits Equity Total liabilities and equity The bank is expecting a $12 million net deposit drain. $62 8 $70 i) Show the new balance sheet if the bank uses purchased liquidity management to offset the expected drain. Also, explain the effect on the size and composition of assets and liabilities ii) Show the new balance sheet if the bank uses stored liquidity management to offset the expected drain. Also, explain the effect on the size and composition of assets and liabilities.
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