Response to the following problem:
Consider the balance sheet for the DI listed below:
Assets ( in Millions) Liablities
Cash 10 Deposits 68
Securities 15 Equity 7
Loans 50
The DI is expecting a $15 million net deposit drain. Show the DI's balance sheet under these two conditions:
a. The DI purchases liabilities to offset this expected drain.
b. The stored liquidity management is used to meet the liquidity shortfall.