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Question
If the bank experiences a $50,000 sudden liquidity drain caused by a loan commitment draw down, what will be the impact on the balance sheet if stored liquidity management techniques are used?
A. A reduction in cash of $21,000 and an increase in demand deposits of $29,000.
B. A reduction in securities and/or current loans totaling $50,000.
C. A reduction in cash of $21,000 and a decrease in securities holdings of $29,000.
D. A decrease in equity of $50,000.
E. A decrease in lending of $50,000.
Answer
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