Reference no: EM133112878

Standard Acme Bancorp has the following assets. What is its Liquidity Index?  (Calculated answer - carry only to the tenths place.)

Item	$ in $1,000s	$ in $1,000s	Risk-Adjustor
Cash	345,000		100%
Short-term Treasuries	12,546,800		100%
Treasury Bonds	609,765		100%
Corporate Bonds	235,680		80%
Muni Bonds	125,600		75%
Loans	345,075,000
Real Estate Loans		275,680,000	90%
Consumer Loans		12,865,000	85%
Comm'l/Bus Loans		56,530,000	95%
Real Estate	345,000		65%
Goodwill & Other Intangibles	2,675,000		0%
	$359,957,845

1. Your bank has $153 million in loan commitments which are now being drawn upon. You aren't sure, but you are beginning to think that the bank may have some problems now. What sort of risk are you concerned about, and how can you remediate it?

a. Underwriting risk; tighten credit requirements.

b. Liquidity risk; enter the repo market.

c. Solvency risk; sell assets or sell a secondary stock issue.

d. Interest rate risk; arrange an interest rate swap.

e. Off-Balance Sheet Risk; arrange swaps, swaptions or forwards at the time the loan commitment is made.

2. Assuming the following balance sheet, what is the Bank's CAR?

ASSETS ($1,000,000s)		LIABILITIES AND EQUITY ($1,000,000s)
Cash	185	Demand Deposits	2187
Fed Reserve Deposits	97	Time Deposits	2210
Treasuries	548	Bonds/Other Debt	258
Mortgages	2561	Equity	270
Commercial Loans	1298
Stocks and Bonds	236
TOTAL ASSETS	4925	TOTAL LIABS & EQUITY	4925