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

question 12

Multiple Choice

Use the following balance sheet (values in thousands of dollars) to answer the question. Assets
Liabilities and equity
Cash required reserves
21
Demand deposits
550
Short-term securities
369
Interbank borrowed funds
151
Loans
400
Equity
89
Total
790
Total
790
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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