Antwerp Financial started its first day of operations with €10 million in capital. €100 million in checkable deposits is received. The bank issues a €30 million commercial loan and another €20 million in mortgages, with the following terms: mortgages: 100 standard 30-year, fixed-rate with a nominal annual rate of 6% each for €200,000. commercial loan: 3-year loan, simple interest paid monthly at 0.5%/month. The bank decides to invest €50 million in 30-day T-bills. The T-bills are currently trading at €4,980 (including commissions; round the number to an integer) for a €5,000 face value instrument. It also borrows €5 million in the fed funds market for 30 days. The required yield on a discount basis is 3%. At the end of month, checkable deposits incur an outflow of €10 million and if Antwerp Financial is required to establish a loan loss reserve at 0.5% of the loan value for commercial loans (assuming the 34% tax bracket), what does the bank balance sheets look like? (seperate required and excess reserves)
Antwerp Financial started its first day of operations with €10 million in capital. €100 million in checkable deposits is received. The bank issues a €30 million commercial loan and another €20 million in mortgages, with the following terms: mortgages: 100 standard 30-year, fixed-rate with a nominal annual rate of 6% each for €200,000. commercial loan: 3-year loan, simple interest paid monthly at 0.5%/month. The bank decides to invest €50 million in 30-day T-bills. The T-bills are currently trading at €4,980 (including commissions; round the number to an integer) for a €5,000 face value instrument. It also borrows €5 million in the fed funds market for 30 days. The required yield on a discount basis is 3%. At the end of month, checkable deposits incur an outflow of €10 million and if Antwerp Financial is required to establish a loan loss reserve at 0.5% of the loan value for commercial loans (assuming the 34% tax bracket), what does the bank balance sheets look like? (seperate required and excess reserves)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Antwerp Financial started its first day of operations with €10 million in capital. €100 million in checkable deposits is received. The bank issues a €30 million commercial loan and another €20 million in mortgages, with the following terms:
- mortgages: 100 standard 30-year, fixed-rate with a nominal annual rate of 6% each for €200,000.
- commercial loan: 3-year loan, simple interest paid monthly at 0.5%/month.
The bank decides to invest €50 million in 30-day T-bills. The T-bills are currently trading at €4,980 (including commissions; round the number to an integer) for a €5,000 face value instrument. It also borrows €5 million in the fed funds market for 30 days. The required yield on a discount basis is 3%.
At the end of month, checkable deposits incur an outflow of €10 million and if Antwerp Financial is required to establish a loan loss reserve at 0.5% of the loan value for commercial loans (assuming the 34% tax bracket), what does the bank
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