90.2K

Verified Solution

Link Copied!

Question 2 (20 marks) 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. Bank's 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? (5 marks) b. Assume unexpected deposit withdrawal of S$10 million. Show the impact on the bank balance sheet if the following liquidity solution is used. i. Stored liquidity (5 marks) ii. Purchased liquidity. (5 marks) c. List and analyse the risks that the bank in this question possibly exposes to. (5 marks) Question 2 (20 marks) 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. Bank's 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? (5 marks) b. Assume unexpected deposit withdrawal of S$10 million. Show the impact on the bank balance sheet if the following liquidity solution is used. i. Stored liquidity (5 marks) ii. Purchased liquidity. (5 marks) c. List and analyse the risks that the bank in this question possibly exposes to

Answer & Explanation Solved by verified expert

See Answer