Use the Following Balance Sheet (Values in Thousands of Dollars)

question 57

Multiple Choice

Use the following balance sheet (values in thousands of dollars) to answer the question. If the bank experiences a $50 000 sudden liquidity drain caused by a loan commitment draw down, what will be the impact on the balance sheet if stored liquidity management techniques are used?

• A) A reduction in cash of $21 000 and an increase in demand deposits of $29 000.
• B) A reduction in securities and/or current loans totalling $50 000.
• C) A reduction in cash of $21 000 and a decrease in securities holdings of $29 000.
• D) A decrease in equity of $50 000.

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Definitions:

Hemorrhage

Excessive bleeding or loss of blood, either internally or externally, from the vascular system.

Nausea

A feeling of sickness with an inclination to vomit.

Fracture

A break in the continuity of a bone.

Infection

The invasion and multiplication of microorganisms such as bacteria, viruses, and fungi that are not normally present within the body, causing disease or illness.