9. Bank leverageUse the information given in North Central National Bank's balance sheet to answer the following questions.Bank's Balance SheetAssetsLiabilities and Owners' EquityReserves$175Deposits$1,400Loans$700Debt$225Securities$875Capital (owners' equity)$125Suppose the owners of the bank contribute an additional $200 from their own funds and use it to buy securities in the name ofincrease the securities account and increase the debt ▼ account.This would also bring the leverage ratio from its initial value of 14.00to a new value ofWhich of the following statements regarding the capital requirement is true? Check all that apply.Its intended goal is to protect the interests of the depositors.It specifies a minimum leverage ratio for all banks.Its intended goal is to protect the interests of those who hold equity in the bank.

Step 1: Initial Leverage Ratio = Assets/CapitalInitial Leverage Ratio = $1750/$125Initial Leverage…

Answered: 9. Bank leverage Use the information…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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37. Suppose that Second Republic Bank currently has $200,000 in demand deposits and $130,000 in outstanding loans. All remaining assets are in reserve. The Federal Reserve has set the reserve requirement at 10%. What is the value of this bank's reserve ratio (R)? (pick best answer) A) 15% B) 25% C) 35% D) 45% 2
11. Please answer the table only. The columns specifically.
Table 14.1: FIRST COMMERCIAL BANK Asset Liabilities Total Reserves: $150,000 $100,000 $1,000,000 $200,000 Deposits Net Worth Required Reserves Excess Reserves ? ? Loans $1,200,000 Total $1,200,000 Total 13. Refer to Table 13. 1. First Commercial bank's excess reserves equal $ a) 150,000 b) 250,000 c) 100,000 d) 50,000
7. The money creation process Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 10%. Hubert, a client of First Main Street Bank, deposits $500,000 into his checking account at First Main Street Bank. Complete the following table to reflect any changes in First Main Street Bank's T-account (before the bank makes any new loans). Assets Liabilities Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 10%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited Change in Excess Reserves Change in Required Reserves (Dollars) (Dollars) (Dollars) 500,000 Now, suppose First Main Street Bank loans out all of its new excess reserves to Eileen, who immediately uses the funds to write a check to Clancy. Clancy…
The table below shows information for United Bank. Deposits Reserves Reserve Requirement $300 million $33 million 10% 37 Which of the following statements is true concerning United Bank in the federal funds market? Multiple Choice United Bank will lend $3 million reserves in the federal funds market. United Bank will borrow $30 million reserves in the federal funds market. United Bank will lend $33 million reserves in the federal funds market. United Bank will borrow $3 million reserves in the federal funds market. # % &
23. Identify the four major methods the Fed uses to control the money supply. Give two examples of situations in which the Fed might use one of these methods and explain why that method is best for the given situation.
28. The assets of a commercial bank may include all of the following except: Question 28 options: a) reserve balances it holds at a Federal Reserve Bank. b) federal funds borrowed from another bank. c) loans a bank makes to its business customers.
Suppose that there are a total of 9 other banks in the economy and that the balance sheet for the whole banking system is presented in the table below. Assume that each of the other banks also has a target reserve ratio of 10%. Assets (1 all) Liabilities/ Equity 50 V Reserves Loans Securities Fixed assets Total 3 E D $ 4 $1,200,000 6,800,000 2,500,000 3,500,000 $14,000,000 f. In the table above, show the balance sheet of this banking system when it is fully loaned up. Use columns (1 all). g. The increase in the money supply as a result of all the banks becoming fully loaned up is $[ R % 5 € 6 T $ G H 7 Demand deposits Shareholders' equity Total $14,000,000 F12 Scr Lk (1 all) $ PrtSc Pause Break 66 Insert
9. Bank leverage Use the information presented in Midwestern Mutual Bank's balance sheet to answer the following questions. Bank's Balance Sheet Assets Liabilities and Owners' Equity Reserves $150 Deposits $1,200 Loans $600 Debt $200 Securities $750 Capital (owners' equity) $100 Suppose the owners of the bank borrow $100 to supplement their existing reserves. This would increase the reserves account and the account. This would also bring the leverage ratio from its initial value of to a new value of Which of the following is true of the capital requirement? Check all that apply. Its intended goal is to protect the interests of the depositors. Its intended goal is to protect the interests of those who hold equity in the bank. It specifies a minimum leverage ratio for all banks.
6. Required and excess reserves Suppose that Second Republic Bank currently has $200,000 in demand deposits and $130,000 in outstanding loans. The Federal Reserve has set the reserve requirement at 10%. Second Republic Reserves Required Reserves Excess Reserves (Dollars) (Dollars) (Dollars)
-The Golden State Bank has total cash reserves of $110,000, deposits of $200,000, and loans of $90,000. The reserve requirement is 5 percent. This bank can make additional loans up to the amount of: $10,000 $5,500 $100,000 $190,000
Table 13.1: FIRST COMMERCIAL BANK Asset Liabilities S150,000 S100,000 Total Reserves: $1,000,000 $200,000 Deposits Net Worth Required Reserves ? Excess Reserves ? Loans $1,200,000 Total $1,200,000 Total 15. Refer to Table 13. 1. First Commercial bank's excess reserves equal $ a) 150,000 b) 250,000 c) 100,000 d) 50,000

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