Question

In: Finance

Suppose that a bank estimates its total deposits for the next four months in millions of...

Suppose that a bank estimates its total deposits for the next four months in millions of dollars to be, respectively, $112, $132, $121, and $147, while its loans (also in millions of dollars) will total an estimated $87, $95, $102, and $113, respectively, over the same four months.

Under the sources and uses of funds approach, when does this bank face liquidity deficits, if any?

Solutions

Expert Solution

Month Source of liquidity
(Deposits)		 Uses of liquidity
(Loans)		 Deposits - Loans
                 1                                112                     87                            25
                 2                                132                     95                            37
                 3                                121                   102                            19
                 4                                147                   113                            34

As can be seen from the above table, the bank has surplus liquidity for the next four months. It does not face any liquidity deficits.

jeff jeffy answered 2 years ago
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