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Finance

As of today, the First ECON Bank of Arlington currently holds:

$200M in transaction deposits

$20M in Bank’s capital

$20M in Investment Securities

$160M in Loans

In addition to that, First ECON Bank also holds $40M in Total Bank Reserves.

The bank manager just noticed that one of the UTA students just withdrew $20M out of the checkable (transaction) deposits.

A) If we assume that that entire amount of the transaction deposits is a subject to the legal 10% reserve requirement, please indicate the required course of the bank’s action to manage its liquidity and meet its legal Reserves requirement:

B) Briefly explain how (if at all) would you answer change if the UTA students withdrew $40M?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91373344

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