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. What is the net liquidity of the bank?
A)$7 million.
B)$12 million.
C)$17 million.
D)$21 million.

Question

Quizplus · Accepted Answer

Net Liquidity = Sources of liquidity - Uses of liquidity
Net liquidity = 22 - 1 = $21 million.

An FI Has $5 Million in Cash Reserves with the Fed