What steps can a bank take to deal with a significant outflow of deposits?
What will be an ideal response?
Banks need to manage their assets so as to reduce exposure to liquidity risk without sacrificing too much profitability. Banks can meet a significant outflow of deposits by drawing down their excess reserves, selling off securities, declining to renew loans, borrowing from other banks and corporations through the federal funds market and repurchase agreements, and borrowing from the Fed through discount loans.
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Refer to Table 2-30. This table shows the number of labor hours required to produce a wristwatch and a bushel of rice in Japan and Thailand
a. Which country has an absolute advantage in the production of wristwatches? b. Which country has an absolute advantage in the production of rice? c. What is Japan's opportunity cost of producing one wristwatch? d. What is Thailand's opportunity cost of producing one wristwatch? e. What is Japan's opportunity cost of producing one bushel of rice? f. What is Thailand's opportunity cost of producing one bushel of rice? g. If each country specializes in the production of the product in which it has a comparative advantage, who should produce wristwatches? h. If each country specializes in the production of the product in which it has a comparative advantage, who should produce rice?
The present value of $475 received 3 years in the future would be calculated as which of the following when the interest rate is 6 percent?
A) 475 × 1.6 × 3 B) 475/(1.6)3 C) 475/(1.06)3 D) 3.06/475