Question

A bank currently has $150 million in "hot money" deposits against which it wants to hold an 80 percent reserve and $90 million in vulnerable deposits against which it wants to hold a 30 percent reserve. It also has $45 million in stable deposits against which it wants to hold a 5 percent reserve. Legal reserves for the bank are 5 percent of all deposits. What is the bank's liability liquidity reserve?

Answer 1

The right response is "141.7875".

Step-by-step explanation:

According to the question,

The total reserves held will be:

=
`0.8* 150+0.3* 90+0.05* 45`

=
`120+27+2.25`

=
`149.25`

Deductions will be:

=
`5 \ percent \ of \ 149.25`

=
`0.05* 149.25`

=
`7.4625`

now,

The bank's liability liquidity reserve will be:

=
`Total \ reserves \ held-Deductions`

=
`149.25-7.4625`

=
`141.7875`