Assume the following balance sheet for All Star Bank. What does the balance sheet look like...

 

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Assume the following balance sheet for All Star Bank. What does the balance sheet look like if a customer decides to exercise a $15MM loan commitment if the bank meets the borrowing need A) by “buying" (borrowing) liquidity and B) by using internal funds? Base Case Liabilities and Equity $110 $40 Assets Cash $30 $90 $50 Deposits Loans Borrowed Funds Securities Equity Total Liab & Equity $20 Total $170 $170 Scenario A - Bank Buys Liquidity Assets Liabilities and Equity Cash Deposits Borrowed Funds Loans Equity Total Liab & Equity Securities Total Scenario B - Bank Uses Internal Funds Assets Liabilities and Equity Deposits Borrowed Funds Cash Loans Securities Equity Total Liab & Equity Total Assume the following balance sheet for All Star Bank. What does the balance sheet look like if a customer decides to exercise a $15MM loan commitment if the bank meets the borrowing need A) by “buying" (borrowing) liquidity and B) by using internal funds? Base Case Liabilities and Equity $110 $40 Assets Cash $30 $90 $50 Deposits Loans Borrowed Funds Securities Equity Total Liab & Equity $20 Total $170 $170 Scenario A - Bank Buys Liquidity Assets Liabilities and Equity Cash Deposits Borrowed Funds Loans Equity Total Liab & Equity Securities Total Scenario B - Bank Uses Internal Funds Assets Liabilities and Equity Deposits Borrowed Funds Cash Loans Securities Equity Total Liab & Equity Total

Answer rating: 100% (QA)

Solution Scenario A Bank Buys Liquidity Assets Lia... View the full answer