Assume that there are 2 chartered banks and their T-accounts are below. Suppose that there arecurrently deposits of $850,000 in Bank A. Mohit borrows $100,000 from Bank A for a housing deposit toCheng-Li. Cheng-Li takes that deposit and puts it into his bank, which is Bank B. The required reserveratio is 18% for all banks. Assume that each bank will use the deposits to make loans and not save anyfor bank capital or bond purchases.You can use the following balance sheets, for Bank A and Bank B to help you answer the question:What are the reserves in Bank A before the money is borrowed from the bank?Bank A's Balance SheetReserves:Loans:Reserves:Loans:Answer:AssetsAssetsLiabilitiesDemand Deposits:Bank B's Balance SheetLiabilitiesDemand Deposits:

(1) The Below are the two main functions of a bank:Accepting Deposit: A bank provides a safe place…

Answered: Assume that there are 2 chartered banks…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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2) Calgary Finance Bank has the following balance sheet: Assets Liabilities $100 $1000 Chequable Deposits Capital $1000 $100 Reserves Loans Assume there is no excess reserve. One day Jack luckily finds a bill of $20 underneath his mattress and he deposits it into this bank. a) Describe how this deposit may affect Calgary Finance Bank's balance sheet. b) What will be the excess reserve now? c) To keep reserve ratio at target level, what would this bank do? How would the action affect its balance sheet? d) If all commercial banks have the same target reserve ratio as this bank, and there is no cash drain, what will be the change in total deposits for the whole banking system after the process of money creation is completed?
Need answers for D. 1, D. 2, and D. 3
Assume that all banks are loaned up and that the reserve requirement is 2%. If you deposit $10,000 in currency into your checking account, what is the change in the MONEY SUPPLY? (Round answers to the nearest whole number, and be careful about signs.)
James, a manager at the local branch of Millerbank, is required by the Fed to set a reserve ratio of at least 10 percent. He opts to not have any excess reserves. If $500 is deposited into his branch, how much can James legally increase its loans? a.5000 dollars b.200 dollars c.50 dollars d.100 dollars e.450 dollars
Your bank pays 4.1% interest annually. You have $2,700 invested in the bank. How long will it take for your funds to double? Group of answer choices 15.53 13.97 17.25 14.73 18.12
A bank makes a loan of $1,000,000 at a rate of 6% p.a. It also requires a compensating balance of 5%. What is the effective cost to the borrower?
Suppose that Big Bucks Bank has the simplified balance sheet shown below. The reserve ratio is 20 percent. Assets Liabilities and net worth (2) (1) (2) Reserves $ 26,000 38,000 36,000 Checkable deposits $ 100,000 Securities Loans Instructions: Enter your answers as a whole number. a. What is the maximum amount of new loans that Big Bucks Bank can make? 2$ Using the table above, show in columns 1 and 1' how the bank's balance sheet will appear after the bank has lent this additiona amount by inserting the new values into the gray shaded cells of the given table. b. By how much has the money supply changed?
Jamila wants to deposit OMR 5000 in a bank fixed deposit for 8 years. She has the following bank deposit options: a) Bank Muscat on maturity will give you OMR 6700. b) Bank Dhofar on maturity will give you OMR 6720. c) National Bank on maturity will give you OMR 6750. d) Help Jamila to find as to what rate of interest bank is offering
Suppose First Main Bank, Second Main Bank, and Third Main Bank all hold zero excess reserves. The required reserve ratio is 20%. Suppose that the Federal Reserve buys a government bond worth $1,500,000 from Jack, a client of First Main Bank. He immediately deposits the money into his checking account at First Main Bank. As a result of this transaction, the required reserves for First Main Bank will increase by $ type your answer... and its excess reserves will increase by $ type your answer...
Use the following table to answer the question about the money supply given the following hypothetical data for an economy. Item Billions of Dollars $2,000 350 80 Checkable Deposits Small Time Deposits Currency Held By The Public Savings Deposits, Including Money-Market Deposit Accounts Money-Market Mutual Funds Held By Individuals Money-Market Mutual Funds Held By Businesses 1,300 600 700 Refer to the table above. The size of the M1 money supply is: Select one: O a. $1,940 O b. S2,730 O c. None of the above O d. S2,220 O e. $2,080 Activate Windows Go to Settings to activate
In the example below, we will use year-end assets. Bank A receives $70 in deposits at 5% and, together with 40 in equity, makes a loan of $90 at 7%. The remaining of assets is G-Bond. We will ignore taxes for the moment. Bank A Cash Reserves for Deposit ? Loan 7% $90 G-Bond 5% ? Deposits 5% $70 Equity $40 Total Assets $? Total Equity and Deposit $110 If Cash Reserves for deposit is at least 8% of the deposit under the Basel Accord, how much of the G-Bond Bank A should purchase? $17 $14 $16 $18 $20 $15 $19 $21
c.) Bank A has three types of assets: Debenture ($90,000), Mortgage ($75,000), and Loan to the Government ($2000). The bank has Tier 1 capital of $15,000 and Tier 2 capital of $20,000. Calculate Capital adequacy ratio. If the capital adequacy requirement ratio is 8%, does the bank meet the requirement?

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