Mountain Top Savings is projecting a net liquidity deficit of $8 million next week partially as...

Mountain Top Savings is projecting a net liquidity deficit of $8 million next week partially as a result of expected quality loan demand of $33 million, necessary repayments of previous borrowings of $16 million, disbursements to cover operating expenses of $15 million, planned stockholder dividend payments of $12 million, expected deposit inflows of $29 million, revenues from nondeposit service sales of $14 million, scheduled repayment of previously made customer loans of $24 million, asset sales of $11 million, and money market borrowings of $17 million. How much must Mountain Top’s expected deposit withdrawals be for the coming week?

Expert Solution

Supplies of Liquidity Flowing into the Mountain Top Savings

Expected deposit inflows	$29 million
Revenues from nondeposit service sales	$14 million
Scheduled repayments of prev.made customer loans	$24 million
Asset sales	$11 million
Money market borrowings	$17 million
Total Source of Liquidity	$95 million

Demands on the Mountain Top Savings for Liquidity

Expected quality loan demand	$33 million
Necessary repayments of previous borrowings	$16 million
Disbursements to cover operating expenses	$15 million
Stockholder dividend payments	$12million
Total Uses of Liquidity Excluding Deposit Withdrawals	$76 million

Net Liquidity Deficit = Liquidity Supplies - Liquidity Demands - Deposit Withdrawals

- $8 million = $95 million - $76 million- Deposit Withdrawals

Therefore, Deposit Withdrawals = $19 million + $8 million = $ 27 million

Therefore, expected deposit withdrawals must equal $ 27 million for the next week.

jeff jeffy answered 1 year ago

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