John Camey,the Money Manager of the First State Bank,has Estimated

question 30

Multiple Choice

John Camey,the money manager of the First State Bank,has estimated that the bank has a 20 percent chance of a liquidity deficit of $700 million,a 30 percent chance of a liquidity deficit of $200 million,a 30 percent chance of a liquidity surplus of $400 million and a 20 percent chance of a liquidity surplus of $900 million over the next week.What is the bank's expected liquidity deficit or surplus over the next week?

• A)$100 million liquidity surplus
• B)$100 million liquidity deficit
• C)$400 million liquidity surplus
• D)$500 million liquidity surplus
• E)$0 liquidity surplus

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Definitions:

Debt

An amount of money borrowed by one party from another, usually with the condition of repayment with interest.

Put Contract

A financial contract granting the owner the privilege to sell a certain asset at a predetermined price during a set period.

Option Price

The amount paid for the option itself, representing the price to buy (call) or sell (put) an underlying asset by a specific date at a specified price.

Exercise Price

The cost at which an option's possessor has the right to acquire (if it's a call option) or divest (if it's a put option) the asset underlying the option.