Assume the following balance sheet for a commercial bank: Assets Reserves Demand Deposits Time Deposits (CDs) Savings Deposits Capital The reserve requirement is 10% of demand deposits. Government Securities Mortgages Loans 50 100 400 Liabilities 450 500 250 170 80 Assets Liabilities Reserves 50 Demand Deposits 500 Government Securities 100 Time Deposits (CDs) 250 Mortgages 400 Savings Deposits 170 Loans 450 Capital 80 The reserve requirement is 10% of demand deposits. a. Suppose the bank earns 0% on its reserves, 2% on its holdings of government securities, 4% on its mortgages and 5% on its loans. What is the bank's return on equity? b. What is the bank's leverage ratio? c. Suppose the bank wants to decrease the amount of its capital. Explain one way that it could do this d. Suppose the value of the mortgages falls to 350 because some borrowers default on their payments. Show the effect that this will have on the balance sheet. e. Suppose the value of the bank's assets decline by x percent. What is the maximum value of x that the bank can sustain and still remain solvent? f. Which liability category is usually the lowest cost of funding for banks? g. Which liability includes borrowing from money market mutual funds?

Assume the following balance sheet for a commercial bank: Assets Reserves Demand Deposits Time Deposits (CDs) Savings Deposits Capital The reserve requirement is 10% of demand deposits. Government Securities Mortgages Loans 50 100 400 Liabilities 450 500 250 170 80 Assets Liabilities Reserves 50 Demand Deposits 500 Government Securities 100 Time Deposits (CDs) 250 Mortgages 400 Savings Deposits 170 Loans 450 Capital 80 The reserve requirement is 10% of demand deposits. a. Suppose the bank earns 0% on its reserves, 2% on its holdings of government securities, 4% on its mortgages and 5% on its loans. What is the bank's return on equity? b. What is the bank's leverage ratio? c. Suppose the bank wants to decrease the amount of its capital. Explain one way that it could do this d. Suppose the value of the mortgages falls to 350 because some borrowers default on their payments. Show the effect that this will have on the balance sheet. e. Suppose the value of the bank's assets decline by x percent. What is the maximum value of x that the bank can sustain and still remain solvent? f. Which liability category is usually the lowest cost of funding for banks? g. Which liability includes borrowing from money market mutual funds?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Monetary System

Section: Chapter Questions

Problem 6PA

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Below is the balance sheet for a bank. Under "Other" it has listed "$X" just think of this as the dollar amount needed to make the balance sheet balance. It is not important what that value is for this question. AssetsLiabilitiesReserves 44Deposits 255Loans 155 Securities 51Other $X Using the balance sheet above, find the level of excess reserves this bank is holding if the required reserve ratio = 6%(Give answers to 2 decimal places as needed)
Below is the balance sheet for a bank. Under "Other" it has listed "$X" just think of this as the dollar amount needed to make the balance sheet balance. It is not important what that value is for this question. AssetsLiabilitiesReserves 42Deposits 245Loans 160 Securities 48Other $X Using the balance sheet above, find the level of required reserves for this bank if the required reserve ratio = 8%(Give answers to 2 decimal places as needed)
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Assets Answer: Liabilities Required Reserves: $460000 Loans $150000 Bonds: $1940000 The above is the T-Accounts for TD bank. If the reserve ratio is 10 percent, what is the change in loans after the excess reserves are loaned out? Deposits: $2550000 Capital: 0
The table below reports the breakdown of assets and liabilities for all commercial banks for January 2020, two months before the start of the COVID-19 recession, and December 2020. Assets (in billions of dollars) Liabilities (in billions of dollars) Jan-20 Dec-20 Jan-20 Dec-20 Loans $10,041.54 $10,376.47 Deposits $13,293.30 $16,061.82 Reserves $1,768.52 $3,168.94 Borrowings $1,965.90 $1,715.81 Treasury Securities $3,008.19 $3,726.10 Other Liabilities $593.42 $825.74 Other Assets $2,984.52 $3,224.45 Total Assets $17,802.77 $20,495.96 Total Liabilties $17,802.77 $20,495.96 From January to December, the net worth of banks changed by $___ billion (round your answer to two decimal places).
05 A bank that has assets of $60 billion and a net worth of $20 billion must have Mc Sraw Hill Multiple Choice excess reserves of $20 billion. O excess reserves of $40 billion. liabilities of $20 billion. liabilities of $40 billion. & V
DMacroeco X + A learn.vccs.edu/courses/362470/quizzes/2905964/take E Apps M Gmail YouTube Maps Get My Payment | . Question 13 Which of the following will yield to a bank the lowest return? O Short term loans with little risk. Long term loans with a lot of risk. There is no distinction in the types of loans and risk or potential return. Loans made where the liquidity rate is the highest. Question 14 2 pts The Federal Reserve has the duty of regulating the nation's money supply. True False Question 15 2 pts P Type here to search
Assets Vault Cash Deposits at Fed Loans Total $50,000 $200,000 $600,000 $850,000 Liabilities and Net Worth First Southern's bank reserves are equal to $ checking deposits, First Southern' would maintain $ reserves over and above the desired amount. Deposits $850,000 Total The increase in the money supply will be $850,000 If First Southern bank wanted to maintain 0.10 of its assets as reserves against as reserves. Therefore, it would have $ as additional If First Southern uses the reserves above the desired level to extend additional loans, the money supply would increase by S If First Southern wanted to maintain 0.05 of its assets as reserves against checking deposits, First Southern' would maintain S as reserves, additional reserves would be $ and the increase in the money supply would be $ if First Southern chooses a desired reserve ratio of 0.05.