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Problem 3: Suppose that a bank’s liquidity division estimates that it holds $19 million in hot...

Problem 3:

Suppose that a bank’s liquidity division estimates that it holds $19 million in hot moneydeposits against which it will hold an 80 percent liquidity reserve, $54 million in vulnerable funds against which it plans to hold a 25 percent reserve, and $112 million in stable or core funds against which it will hold a 5 percent liquidity reserve. The bank expects its loans to grow 8 percent annually; its loans currently stand at $117 million, but have recently reached $132 million. If reserve requirements on liabilities currentlystand at 3 percent, what is this depository institution’s total liquidity requirement?

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jeff jeffy answered 11 months ago
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