Explanation

The Available Funds Gap (AFG) is calculated as:

AFG = (Current and projected loans and investments) - (Current and projected deposit inflows and other funds available)

Step 1: Identify Outflows (Loans and Investments)

• Approved new loan requests: USD 57 million
• Expected drawdown on corporate client's credit lines: USD 16 million
• 10-year Treasury securities expected to be purchased: USD 35 million
• Total Outflows = 57 + 16 + 35 = USD 108 million

Step 2: Identify Inflows (Deposits and Available Funds)

• Deposits received today: USD 60 million
• Deposit inflows expected within the next week: USD 12 million
• Other customer funds available today: USD 45 million
• Total Inflows = 60 + 12 + 45 = USD 117 million

Step 3: Calculate AFG

AFG = 108 - 117 = USD -9 million

This negative AFG of USD -9 million means the institution has USD 9 million in surplus funds after meeting all projected loan and investment needs. Therefore, the institution can meet up to USD 9 million in unexpected customer withdrawals while maintaining an AFG of zero.

Why Other Options Are Incorrect:

• A (USD 0 million): Incorrect because the AFG is not zero; there's a surplus of USD 9 million
• B (USD 3 million): Incorrect because it ignores the projected deposit inflows of USD 12 million
• D (USD 15 million): Incorrect because it's the difference between deposit funds and other customer funds, not the actual AFG calculation