Homework Answers
1)Calculate the financing gap.
Financing gap =average loans - average deposits=$30 million-$15 million =$15 million.
2)what is the financing requirement?
Financing requirement =financing gap + liquid assets =$15 million + $10 million =$25 million
3)how can the financing gap be used in the day-to-day liquidity management of the bank ?
A raising financial gap on a daily basis over a period of time may indicate future liquidity problems due to increased deposit withdrawals and increased exercise of loan commitments. Sophisticated lenders in the money markets may be concerned about these trends,and they may react by imposing higher risk premiums for borrowed funds or stricter credit limits on the amount of funds lend.
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