An FI Has $5 Million in Cash Reserves with the Fed

question 90

Multiple Choice

An FI has $5 million in cash reserves with the Fed in excess of its reserve requirements,$5 million in T-Bills,and a credit line of $10 million to borrow in the repo market.It currently has lent $2 million in the Fed Funds market and borrowed $1 million from the Federal discount window to meet its seasonal needs.

Assume that the T-Bills can only be sold at a 10 percent discount,what is the net liquidity of the bank given this information?

• A)$6.5 million.
• B)$11.5 million.
• C)$16.5 million.
• D)$20.5 million.

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Definitions:

Planning

The process of setting goals, developing strategies, and outlining tasks and schedules to achieve the goals.

Product/Service Quality

The measure of excellence or state of being free from defects, deficiencies, and significant variations, assessed by comparing a product or service to established standards.

Mary Parker Follett

A pioneering theorist in organizational behavior and management who emphasized the importance of integrative conflict resolution and human relations.

Build-It-In Approach

A methodology focusing on integrating quality and efficiency into the process of product or service development rather than inspecting quality after production.