Explanation:
Correct Answer: C
Explanation: C is correct. -50 + 80 + 120 - 100 + 80 - 70 - 40 - 60 = -40
A is incorrect. This choice incorrectly reverses the sign for borrowings from money market.
B is incorrect. This choice incorrectly reverses the sign for scheduled loan repayments and acceptable loan requests.
D is incorrect. This choice incorrectly reverses the sign for repayment of bank borrowings.
Section: Liquidity and Treasury Risk
Learning Objective: Calculate a bank's net liquidity position and explain factors that affect the supply and demand of liquidity at a bank.
Reference: Peter Rose, Sylvia Hudgins, Bank Management & Financial Services, 9th Edition (New York, NY: McGraw-Hill, 2013). Chapter 11 - Liquidity and Reserves Management: Strategies and Policies
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A treasurer at a regional bank is assessing the bank's liquidity position. The treasurer estimates that the following cash inflows and outflows will occur in the next week:
| Cash Flows | Amount (USD million) |
|---|---|
| Deposit withdrawals | 50 |
| Deposit inflows | 80 |
| Scheduled loan repayments | 120 |
| Acceptable loan requests | 100 |
| Borrowings from money market | 80 |
| Operating expenses | 70 |
| Stockholder dividend payments | 40 |
| Repayment of bank borrowings | 60 |
Which of the following is the correct amount (in millions of USD), at the week's end, for the bank's net liquidity position?
A
USD -200
B
USD -80
C
USD -40
D
USD 80
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