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Question
An FI has $5 million in cash reserves with the Fed in excess of its reserve requirements, $5 million in T-Bills, and a credit line of $10 million to borrow in the repo market. It currently has lent $2 million in the Fed Funds market and borrowed $1 million from the Federal discount window to meet its seasonal needs.
Assume that the T-Bills can only be sold at a 10 percent discount, what is the net liquidity of the bank given this information?
A. $6.5 million.
B. $11.5 million.
C. $16.5 million.
D. $20.5 million.
E. $21.5 million.
Answer
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