1. A bank in Singapore has the following balance sheet (in million): Assets Cash S$10...
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Finance
1. A bank in Singapore has the following balance sheet (in million):
Assets
Cash S$10 ,Mortgage Loans S$110, Securities S$30, Total assets S$150
Liabilities and Equity
Deposits S$100, Purchased funds S$35, Equity S$15, Total liabilities and equity S$150
This bank has S$6 million in excess cash reserves, and S$25 million line of credit to borrow in money market. Banks securities portfolio consists of S$10 million of short- term government bonds with lower price risk, and S$20 million of long-term corporate bonds with higher price risk. The bank currently has borrowed S$10 million in the money market.
Required:
a. Compute the net liquidity of the bank?
b. Assume unexpected deposit withdrawal of S$10million.Show the impact onthe bank balance sheet if the following liquidity solution is used.
i. Stored liquidity.
ii. Purchased liquidity.
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