Rank the following bank assets from most to least liquid:

a. Commercial loans

b. Securities

c. Reserves

d. Physical capital

Short Answer

Expert verified

The most to least liquid bank assets are:

Reserves, securities, Commercial loans, physical capital

Step by step solution

01

Content Introduction

The bank resources are the resources which a bank owes and have privileges over those resources. Not many of the bank resources incorporate money held, protections of government and those credits which are revenue bearing profit. These go about as a boundary for obligation property of the bank.

Fluid Funds are those subsidizes which contribute for a brief period by putting resources into obligations and create better yields.

02

Step 2:Explanation (Part a)

A business credit is an obligation based subsidizing course of action between a business and a monetary establishment like a bank. Numerous business credits require security, like property or hardware. They are less fluid resources.

03

Explanation (Part b)

In the banking industry, security is defined as a financial instrument or asset that may be traded readily on the open market. Securities include things like stocks, bonds, options, shares, contracts, and so on.

04

Explanation (Part c)

Bank holds are the negligible measures of money that banks are expected to keep close by if there should arise an occurrence of unforeseen interest. Abundance holds are the extra money that a bank keeps close by and declines to advance out. Protections structure a critical piece of the monetary design of an economy.

05

Explanation (Part d)

Actual capital comprises of substantial, human-made objects that an organization purchases or puts resources into and utilizations to create products. Actual capital things, like assembling hardware, likewise fall into the class of fixed capital, meaning they are reusable, and not consumed during the creation interaction.

06

Conclusion

Therefore, we can say that the most to least liquid assets of bank are:

Reserves, securities, Commercial loans, physical capital.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Suppose your bank has the following balance sheet:

What would happen to bank profits if the interest rates in the economy go down? What actions could you take to reduce the bank’s interest-rate risk?

If you are a banker and expect interest rates to rise in the future, would you prefer to make short-term loans or long-term loans?

Go to the St. Louis Federal Reserve FRED database, and find data for all commercial banks on total liabilities (TLBACBM027SBOG), total deposits (DPSACBM027SBOG), and residual of assets less liabilities (RALACBM027SBOG).

a. What is the balance sheet interpretation of the residual of assets less liabilities?

b. For the most recent month of data available, use the three indicators listed above to calculate the total amount of borrowings by banks.

Go to the St. Louis Federal Reserve FRED database, and find data for all commercial banks on total assets (TLAACBM027SBOG), U.S. government and agency securities held (USGSEC), other securities held (OTHSEC), commercial and industrial loans (BUSLOANS), real estate loans (REALLN), consumer loans (CONSUMER), interbank loans (IBLACBM027SBOG), other loans (OLLACBM027SBOG), and other assets (OATACBM027SBOG). Use the most recent month of data available across all indicators.

a. What is the total amount of loans held by banks? What is this number as a percentage of total bank assets?

b. What is the total amount of securities held by banks? What is this number as a percentage of total bank assets?

c. What is the total amount of reserves and cash items? What is this number as a percentage of total bank assets?

Table 1 reports the balance sheet of all commercial banks based on aggregate data found in the Federal Reserve Bulletin. Compare this table to the most recent balance sheet reported by Bank of America. Go to http://investor .bankofamerica.com/phoenix.zhtml?c=71595&p=irolreportsannual#fbid=Fkk8V4xUVzI and click on the most recent annual report to view the balance sheet. Does Bank of America have more or less of its portfolio in loans than the average bank? Which type of loan is most common?

See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free