Explanation:
| Liquidity Deficit or Surplus in Millions | Probability | Expected Value |
|---|---|---|
| $(500.00) | 45% | $(225.00) |
| $(575.00) | 20% | $(115.00) |
$350.00 | 25% | $87.50 |
$100.00 | 10% | $10.00 |
| 100% | $(17.50) |
Expected Liquidity Requirement = $0.45 \times (-`500`\ \text{million}) + 0.20 \times (-\`575\ \text{million}) + 0.25 \times (+\350`\ \text{million}) + 0.10 \times (+\`100\ \text{million})$ = $-\225`\ \text{million} - \`115\ \text{million} + \87.50`\ \text{million} + \`10\ \text{million}$ = $-\
The bank is faced with an expected liquidity deficit of -$242.5 million in the coming month.
Ultimate access to all questions.
No comments yet.
Q.3904 Suppose Grand Bank's liquidity manager estimates that the bank experiences a liquidity deficit of $500 million in the coming month with a probability of 45%, a $575 million liquidity deficit with a probability of 20%, a liquidity surplus of $350 million with a probability of 25%, and a $100 million liquidity surplus with a probability of 10% What is the bank’s expected liquidity requirement?
A
-$10.00
B
-$242.50
C
$22.75
D
$30.00