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:

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A chronic disease characterized by uncontrolled drinking and preoccupation with alcohol, leading to significant impairment or distress.

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A personality trait characterized by sociability, talkativeness, and a tendency to seek stimulation in the company of others.

Depression

A mental health disorder characterized by persistently depressed mood or loss of interest in activities, causing significant impairment in daily life.