Why do depository institutions face pledging requirements when they accept government deposits?
Answer to relevant QuestionsWhat types of securities are used to meet collateralization requirements?Spiro Savings Bank currently holds a government bond valued on the day of its purchase at $5 million, with a promised interest yield of 6 percent, whose current market value is $3.9 million. Comparable quality bonds are ...Forever Savings Bank also purchases municipal bonds issued by the city of Richmond. Currently the bank is considering a nonqualified general obligation municipal issue. The bonds, which mature in 15 years, provide a nominal ...What are the principal sources of liquidity demand for a financial firm?Suppose that a thrift institution’s liquidity division estimates that it holds $19 million in hot money deposits and other IOUs against which it will hold an 80 percent liquidity reserve, $54 million in vulnerable funds ...
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