What is liquidity index

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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

Reference no: EM133112878

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