Question

In the week about to begin, a bank expects $30 million in incoming deposits, $20 million in deposit withdrawals, $15 million in revenues from the sale of nondeposit services, $25 million in customer loan repayments, $5 million in sale of bank assets, $45 million in money market borrowings, $60 million in acceptable loan requests, $10 million in repayments of bank borrowings, $5 million in cash outflows to cover other operating expenses, and $10 million in dividend payments to its stockholders. The bank's net liquidity position for the week is expected to be:
A. $30 millionB. $10 millionC. $20 millionD. None of the other responses are correctE. $15 million

Answer 1

Answer:

The answer is E. $15 million

Explanation:

We have the bank's net liquidity position is equal to its Cash inflow - Cash outflow.

Cash inflow = incoming deposits + revenues from the sale of nondeposit services + customer loan repayments + sale of bank assets + money market borrowings= 30 million + 15 million + 25 million + 5million + 45 million = $120 million

Cash outflow =  deposit withdrawals + acceptable loan requests + repayments of bank borrowings + cash outflows to cover other operating expenses + dividend payments to its stockholders = 20 million + 60 million + 10 million + 5 million + 10 million = $105 million

So, net liquidity position is:  120 million - 105 million = $15 million.

So, the answer is E. $15 million.