1)Create the initial balance sheet of the bank (20 points).

In billion dollars

Assets Liabilities
0% 14 AMD 120 AMD
0% CB Accounts 22 USD Demand Dep. 80 USD
1% 15 AMD 20 AMD
1% Nostro 10 B USD Term Dep. 30 USD
8% 119 AMD
Securities
10% 119 AMD
7% Loans 24 USD

FA 27 Capital 100

In total 350 350

2)Calculate the Net Interest Margin (15 points).

NIM 12.6022857143 %

4)Calculate the FX position and indicate its direction before and after the deposit ou

Before
 Assets Liabilities

AMD 294 AMD 240

USD 56 USD 110

Total 350 Total 350

Answer: In both of the cases, the company is falling short of foreign currency denominated assets. Be

5) If after the deposit outflow the exchange rate changes to AMD 420 = 1USD how much would the
bank. Is the bank still compliant with Central Bank reservation requirement (1

FX Rate 400 AMD

Assets Liabilities

AMD 263.6 AMD 204

USD 47.4 USD 107

Total 311 Total 311
 6)Calculate and interpret liquidity ratios for the bank (10 points).

Cash Ratio = Cash and Cash Equivalents / Total Current Liabilities

This ratio indicates that for every unit of current liabilities, the bank has approximately 0.244 units o
and cash equivalents readily available. It reflects the bank's ability to cover short-term obligations w
most liquid assets. A higher ratio is generally preferable, suggesting better liquidity and ability to m
immediate obligations.

Quick Ratio = Quick Assets / Total Current Liabilities

The quick ratio shows that for every unit of current liabilities, the bank holds around 0.72 units of q
assets, including cash, cash equivalents, and highly liquid securities. It assesses the bank's ability to
short-term obligations without relying on inventory or less liquid assets. A ratio above 1 indicates a s
ability to meet short-term liabilities.

Current Ratio = Current Assets / Total Current Liabilities

This ratio reveals that for every unit of current liabilities, the bank possesses approximately 1.292 un
current assets, including quick assets and other assets expected to convert into cash within a year. It p
a broader view of liquidity compared to the quick ratio. A ratio above 1 indicates that the bank has mo
enough current assets to cover its short-term obligations.
 3)Now suppose that 30% of AMD demand deposits and equivalent of 10%
Please show the changes on the balance sheet an

5% Demand Deposits 36 AMD

5% Term Deposits 3 USD
7%
6% Assets
0% 10.4 AMD
0% CB Accounts 21.4 USD
1% 4 AMD
1% Nostro 2 USD
8% 103.2 AMD
Securities
10% 119 AMD
7% Loans 24 USD

FA 27

In total 311

Net Interest Margin

NIM 11.1499228296

efore and after the deposit outflow (20 points).

After
 Assets

AMD 263.6

USD 47.4
Total 311

rrency denominated assets. Before 56<110, and after 47.4<107

= 1USD how much would the revaluation gain or loss be for the
nk reservation requirement (15 points)?

FX Rate 420 AMD

Assets

AMD 263.6

USD 49.77
Total 313.37

To calculate whether the bank is still compliant with the rese

of foreign currency and 10% of domestic currency). Ou
denominated liabilities, the bank should keep 112.35*0.2=22
old reserve amount(from Q3's table) we have 21.4+2=23.
1USD=400AMD), after currency change it would be worth 23
So, the reserve requirement is 22.47, and bank keeps a little
which means that it is compliant.
 So, the reserve requirement is 22.47, and bank keeps a little
which means that it is compliant.

the bank (10 points).

Total Current Liabilities 0.244

s approximately 0.244 units of cash

over short-term obligations with its
better liquidity and ability to meet

urrent Liabilities 0.72

k holds around 0.72 units of quick

assesses the bank's ability to cover
s. A ratio above 1 indicates a strong
.

Current Liabilities 1.292

sesses approximately 1.292 units of

ert into cash within a year. It provides
ndicates that the bank has more than
obligations.
eposits and equivalent of 10% of USD term deposits were called back by the depositors.
nges on the balance sheet and calculate the new NIM (20 points).

Liabilities
84 AMD 5%
Demand Dep. 80 USD 5%
20 AMD 7%
Term Dep. 27 USD 6%

10700% 23,4 should have kept 21,4 but keeps 23,4

112,35 22,47

Capital 100

311

Net Interest Margin

%
 Liabilities

AMD 204

USD 107
Total 311

Liabilities

AMD 204

USD 112.35
LOSS 2.98
Total 313.37

s still compliant with the reserve requirement(20%

0% of domestic currency). Out of 112.35USD
k should keep 112.35*0.2=22.47 in its reserve. The
's table) we have 21.4+2=23.4$ in assets(when
change it would be worth 23.4*420/400=24,57$.
22.47, and bank keeps a little bit over that, 24,57$
means that it is compliant.
22.47, and bank keeps a little bit over that, 24,57$
means that it is compliant.
pt 21,4 but keeps 23,4