Bank Three currently has $600 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the rerequirement at 10 percent of transaction deposits.servea. If the Federal Reserve decreases the reserve requirement to 8 percent, show the balance sheet of Bank Three and the FederalReserve System just before and after the full effect of the reserve requirement change. Assume Bank Three withdraws all excessreserves and gives out loans and that borrowers eventually return all of these funds to Bank Three in the form of transaction deposits.b. Redo part (a) using a 12 percent reserve requirement.Complete this question by entering your answers in the tabs below.Required A Required BIf the Federal Reserve decreases the reserve requirement to 8 percent, show the balance sheet of Bank Three and the Federal Reserve Systemjust before and after the full effect of the reserve requirement change. Assume Bank Three withdraws all excess reserves and gives out loansand that borrowers eventually return all of these funds to Bank Three in the form of transaction deposits. (Do not round intermediatecalculations. Enter your answers in millions rounded to the nearest dollar amount.)Show less aPanel A: Initial Balance SheetsFederal Reserve BankAssetsLiabilitiesSecurities60 millionReserve accounts60 millionBank ThreeAssetsLiabilitiesLoans540 million60 millionTransaction deposits600 millionReserve deposits at FedPanel B. Balance Sheet after All ChangesFederal Reserve BankAssetsLiabilitiesSecurities60 millionReserve accounts60 milionBank ThreeAssetsLiabilitiesLoansmillionTransaction depositsmillionReserve deposits at Fed60 million

Reserve Deposit is the amount of fund which the financial Institution or Commercial banks need to…

Answered: Bank Three currently has $600 million…

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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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?
A local bank policy is to hold 12.77% of its deposits as reserves. With current deposits of $8 million and excess reserves of $200,000, calculate the necessary reserve on a fresh deposit of $30,000. Required reserve for new deposit =$ (The answer should be rounded to Zero (0) decimals without the $ sign.)
A new bank has vault cash of $2 million and $6 million in deposits held at its Federal Reserve District Bank.If the required reserves ratio is 9 percent, what dollar amount of deposits can the bank have?
Beleaguered State Bank (BSB) holds $200,000,000 in deposits and maintains a reserve ratio of 10%, which also is the reserve requirement. On paper, write the T account for BSB and use it to answer the rest of this question. Now suppose that BSB's largest depositor withdraws $10,000,000 from her account one day. On paper, show the effect of this on the T account. How many dollars of cash reserves does BSB need to raise to be allowed to open for business the next morning?
A commercial bank estimates that its fixed rate assets are earning an average interest income of 10%, while its variable rate liabilities are forecast to pay the interest rates below: End of Year 0 1 2 3 4 5 LIBOR 7% 8% 12% 13% 11% Interest Rate Ceiling 10% 10% 10% 10% 10% Suppose it sets up an interest rate ceiling arrangement with another financial institution at 10%. Assuming a notional amount of $50,000,000 and using the LIBOR forecast for each year to discount back the payments incurred, what would be the present value of these payments?
13. If a bank has $4,000 of checkable deposits (DD), $3,000 in loans, and a required reserve ratio (rT) of 10 percent. The bank's excess reserves are A) $1,000. DD= 400o 3000 = 1oans B) $600. C) $1,400 D) $3,400
The Central Bank requires banks to maintain a 10% legal minimum reserve requirement of their deposits. Bank A with total deposits of $100 million isfully loaned up. This means that Bank A has excess reserves of A. 0 B. $10 million C. $1,000 million
The table below is the balance sheet for the Oilers Bank, which has a target reserve ratio of 5%. Liabilities/Equity Demand Deposits Shareholders' equity Assets $4,000 62,000 17,000 9,000 Reserves $72,000 20,000 Loans Securities Fixed assets Total 92,000 Total 92,000 a. The Oilers Bank is over-reserved v by $ b. The bank makes a loan equal to the excess reserves and the borrower writes a cheque (for the full amount of the loan) to another customer of the bank, who then deposits it. The new amount of excess reserves is $ c. Instead, the cheque written by the borrower is cleared against the Oilers Bank (the cheque was written to a customer of another bank). The amount of excess reserves held by the Oilers Bank is $ 14 of 40 Next > < Prev
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Bank two currently has $500 million in transaction deposits. The bank has $65 million in reserves. The and its Federal reserve requirement ratio is 12%. The bank's required reserves are excess reserves are A. $60 million; $0. B. $60 million; $5 million. C. $440 million; $5 million. D. $600 million; $60 million.

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