9. Bank leverage Use the information given in Upper Midwest National Bank's balance sheet to answer the following questions. Assets Reserves Loans Bank's Balance Sheet $125 Liabilities and Owners' Equity $1,250 Deposits $625 Debt Securities $500 Capital (owners' equity) Suppose a new customer adds $100 to his account at Upper Midwest National Bank, which the owners of the bank then use to make $100 worth of new loans. This would increase the loans account and increase the debt account. $75 This would also bring the leverage ratio from its initial value of -16.67 to a new value of -18.00 The riskiness of each asset -$75 Which of the following do bankers consider when deciding how to allocate their assets? Check all that apply. The size of the monetary base ✔The total value of liabilities

9. Bank leverage Use the information given in Upper Midwest National Bank's balance sheet to answer the following questions. Assets Reserves Loans Bank's Balance Sheet $125 Liabilities and Owners' Equity $1,250 Deposits $625 Debt Securities $500 Capital (owners' equity) Suppose a new customer adds $100 to his account at Upper Midwest National Bank, which the owners of the bank then use to make $100 worth of new loans. This would increase the loans account and increase the debt account. $75 This would also bring the leverage ratio from its initial value of -16.67 to a new value of -18.00 The riskiness of each asset -$75 Which of the following do bankers consider when deciding how to allocate their assets? Check all that apply. The size of the monetary base ✔The total value of liabilities

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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…
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.
Table 13.1: FIRST COMMERCIAL BANK Asset Liabilities Total Reserves: S150,000 s100,000 $1,000,000 $200,000 Deposits Net Worth Required Reserves Excess Reserves ? Loans $1,200,000 Total $1,200,000 Total 16. Refer to Table 13.1. First Commercial Bank's total loans equal $ a) 1,050,000 b) 1,200,000 c) 1,150,000 d) 1,250,000
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No written by hand solution
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)
Refer to the balance sheet below for Glitterton Bank: Liabilities $2000.00 Deposits $2300.00 Assets Loans Securities $3500.00 Reserves $300.00 Calculate Glitterton Bank's net worth: $
-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
Northern Bank: Balance Sheet Assets Liabilities Reserves Loans $780 $15,220 $16,000 Deposits Capital $13,000 $3,000 $16,000 Refer to the table above. Assume that Northern Bank's target reserve ratio is 8 percent. In order to achieve its target reserve ratio, Northern Bank must and ○ A. increase its reserves by $130; decrease its deposits by $130 ○ B. increase its reserves by $260; decrease its loans by $260 ○ C. increase its reserves by $260; decrease its deposits by $260 OD. increase its reserves by $130; increase its loans by $260 ○ E. not change its reserves; not change its deposits
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