A Bank Has a Need for Cash for a Short

question 17

Essay

A bank has a need for cash for a short period of time to meet its liquidity needs. The bank has significant holding of U.S. treasury securities. The bank really does not want to sell the securities, realizing the liquidity need is a temporary problem. A pension fund has significant cash holdings and would like to earn some return on part of these holdings. The problem is the fund will need this cash in a few days to honor a purchase agreement it made for municipal bonds being issued. Is there any way these two organizations can work together to solve each other's problem?

---

Definitions:

Variable Costs

Costs that change in proportion to the level of production or business activity.

Full Costs

This refers to the comprehensive total amount that includes all relevant costs of production, including direct, indirect, fixed, and variable costs.

Cost of Goods Sold

The historical cost of products sold as reported in the income statement.