Calculate Sources Of Liquidity, Uses Of Liquidity And Net Liquidity For A Company


An FI has $5 million in cash reserves with the Fed in excess of its reserve requirements, $5 million in T-Bills, and a credit line of $10 million to borrow in the repo market. It currently has lent $2 million in the Fed Funds market and borrowed $1 million from the Federal discount window to meet its seasonal needs.

1. What are the bank’s total available sources of liquidity?
    a. $17 million.
    b. $18 million.
    c. $20 million.
    d. $21 million.
    e. $22 million.
2. What are the bank’s current total uses of liquidity?
    a. $1 million.
    b. $3 million.
    c. $8 million.
    d. $10 million.
    e. $15 million.
3. What is the net liquidity of the bank?
    a. $7 million.
    b. $12 million.
    c. $17 million.
    d. $21 million.
    e. $22 million.
4. Assume that the T-Bills can only be sold at a 10 percent discount, what is the net liquidity of the bank given this information?
    a. $6.5 million.
    b. $11.5 million.
    c. $16.5 million.
    d. $20.5 million.
    e. $21.5 million.


The question belongs to Finance and it is about calculating the financial institution’s available sources of liquidity, its current total uses of liquidity, its net liquidity if the financial institution has $5 million cash reserves.

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