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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what is the maximum amount of loans that the Second National Bank can make if it holds only the required reserves?
1. A company usually has an average balance in its bank account equal to $60,000. TheThe company makes a loan for $80,000 to pay it off over the long term. The interest rate on the loan is7%. The bank requires the company that, while the loan is in force, the company must havean average balance in your bank account of not less than $80,000. The requirement of this balancecompensation will result in the effective interest rate that the company will pay will be:a. 7%b. Less than 7%c. Greater than 7%d. cannot be determined
17. Assume that a bank obtains most of its funds from long-term borrowed funds such as Federal Home Loan Bank borrowings. The bank's assets are in the form of loans with rates that adjust affected if interest rates every three months. In the next three months, the bank would be increase. A. negatively. B. favorably. C. unaffected.
(Please Solve in 20mins And provide a good explanation along with the answer. Thank you)
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.)
On April 2, 2020, shortly after the $7.5 million deposit outflow, Key Bank had borrowed the needed fund in the fed funds market to cover the shortfall in reserves for the remainder of the month (29 days, from 4/2 to 4/30). The required yield on a discount basis was 1.5%. On April 30, 2020, Key Bank finally received the first required payments from its mortgages, loan, and T-bills, and it also paid off its fed funds loan. Key Bank was required to establish a loan loss reserve at 0.5% of the commercial loan value and the bank was in the 35% tax bracket. The bank had not engaged in any off-balance-sheet activities. Question: According to the balance sheet as of April 30, 2021, was Key Bank complying with the risk weighted capital requirement set by Basel 1? Group of answer choices The bank's tier 1 capital, but not total capital, meets the minimum requirement. The bank's total capital, but not tier 1 capital, meets the minimum requirement. Neither tier 1 capital nor total capital of the…
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
I deposited Rs. 3 million of my money in a Habib Bank Limited, State Bank of Pakistan: Required rate of reserve ratio (RRR): Weekly Average Demand Liability was set as 10.0 % in June 2020. You are required to calculate the change in the money supply in the economy. If RRR decreased to 5% in August 2020, what will happen with the same deposit of Rs. 3 million. You are also required to compare and discuss atleast in 200 words.
Gab Company expects that it will need P600,000 cash for March 2022. Possible means of financing are: (A) Establish a 1-year credit line for P600,000. The bank requires a 2 percent commitment fee. The interest rate is 21 percent. Funds are needed for 30 days. (B) Fail to take a 2/10, net/40 discount on a P600,000 credit purchase. (C) Issue P600,000, 20 percent commercial paper for 30 days. Which financing strategy should be selected? Provide solution a. Strategy Ab. Strategy Bc. Strategy Cd. Strategy A and Be. Strategy B and C
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A bank has three assets. It has $75 million invested in consumer loans with a three-year duration, $39 million invested in T-bonds with a 16-year duration, and $39 million in six-month maturity T-bills. What is the duration of the bank's asset portfolio in years? Group of answer choices 11.51 years 7.38 years 3.95 years 5.68 years
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...

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