Question: 19. Consider the simple FI balance sheet below (in millions of dollars). ______________________________________________________________________________ Before the Withdrawal Assets Liabilities/Equity Cash assets $ 20 Deposit $150 Nonliquid

19.Consider the simple FI balance sheet below (in millions of dollars).

______________________________________________________________________________

Before the Withdrawal

Assets Liabilities/Equity

Cash assets $ 20 Deposit $150

Nonliquid assets155Equity25

$175 $175

Suppose that depositors unexpectedly withdraw $50 million in deposits and the FI receives no new deposits to replace them. Assume that the FI cannot borrow any more funds in the short-term money markets, and because it cannot wait to get better prices for its assets in the future (as it needs the cash now to meet immediate depositor withdrawals), the FI has to sell any non-liquid assets at 75 cents on the dollar.

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