A DI has $19 million in T-bills, a $11 million line of credit to borrow in...
A DI has $19 million in T-bills, a $11 million line of credit to
borrow in the repo market, and $11 million in excess cash reserves
with the Fed. The DI currently has borrowed $13 million in fed
funds and $9 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?
(For all requirements, enter your answers in
millions.)
Homework Answers
a. DI’s total available (sources of) liquidity = $19 +$11 + $11 = $41 million
b. DI’s current total uses of liquidity = 13 + 9 = $22 million
c. net liquidity of the DI = 41 - 22= $19 million
d. A net liquidity suggets that DI can withstand unexpected withdrawals of $19 million without moving the less liquid at fire sale prices.
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