Question

A DI has $17 million in T-bills, a $10 million line of credit to borrow in the repo market, and $10 million in excess cash reserves with the Fed. The DI currently has borrowed $11 million in fed funds and $7 million from the Fed discount window to meet seasonal demands.

a. What is the DI’s total available (sources of) liquidity?
b. What is the DI’s current total uses of liquidity?
c. What is the net liquidity of the DI?
d. What conclusions can you derive from the result?

Answer 1

Solution Tobillda $17 million tine of credit - $10 million Encess cash reserved - $ 10 million an DI's total available resources = Tobillst time of credit & Encess Cash reserves 17 + 10 +10 = 1$37 million Dit's current total use of Liquidity = current fed fund of Fed Discount window. 11+7 = $18 million Da's net tiquidity = DT's total available total lese of Liquidity resources $39 - $ 18 $19 million. alet Liquidity is $ 19 million. It suggests that the depository institutione can also withstand the withdrawls which are unexpected of $12 million in order to decrease the less liquid assets which have fire- sale rate Wor