Derby Bank has the following balance sheet. 

Assets ($ million) Liabilities and equity ($ million) 

Treasury notes 85 

Deposits 125 

Loans 115 

Interbank funds 55 

Equity 20 

Total assets 200 

Total liabilities and equity 200 

One of Derby Bank’s wholesale customers decides to make an immediate deposit withdrawal of $15 million. To fund this withdrawal request, the bank adopts a liability liquidity management approach via the interbank funds market. 

Which of the following statements is CORRECT? 

Select one: 

a. After the transactions, the bank has 110m in deposits, 70m in interbank funds, and total assets remain unchanged. 

b. After the transactions, the bank has 125m in deposits, 70m in interbank funds, and 215m in total assets. 

c. After the transactions, the bank has 140m in deposits, 40m in interbank funds, and total assets remain unchanged. 

d. After the transactions, the bank has 110m in deposits, 40m in interbank funds, and 170m in total assets.

Answer rating: 100% (QA)

The detailed answer for the above question is provided below The correct answer is d After the trans... View the full answer