+Cash ReservesOf which RequiredASSETSExcess reservesLoansSecuritiesIncludes $10 million USTSMortgagesLoans to other banks$10 million$5 million$5 million$55 million$15 million$12 million$3 millionDemand DepositsSavings DepositsCDsLIABILITIESBorrowing from FROwners' EquityA. Does this bank meet a 10% required reserve requirement? Explain.B. Does this bank meet an 8% capital to asset ratios? Why or why not?$50 million$10 million$20 million$5 million$10 millionC. A new firm comes into town. It is seeking funding to build a new plant. Can this bank competefor that business? How?

The Reserve Requirement is the minimum amount that a commercial bank must hold in liquid assets to…

Answered: Cash Reserves Of which Required ASSETS…

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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Assume the Bank of Smallville opens its doors to depositors and receives $100,000 in cash deposits. a) Prepare a balance sheet for Bank of Smallville based on the above information. b) Assume furthermore that the bank has to abide by a 20% reserve ratio. How much in excess reserves does the bank hold? Could this bank make a loan in the amount of $90,000? Briefly explain. c) Based on the amount of excess reserves, if the bank makes the loans, show the immediate impact on the Bank of Smallville's balance sheet. d) Calculate value of the money multiplier? e) How much money would be created in the banking system if other banks also lend as much as possible? Part B a) What is meant by the term "excess supply of money?" How does the money market resolve this disequilibrium? b) Explain with diagrams, what happens to the money supply, interest rates, investment spending and GDP when the central bank makes open market purchases.
Risk Weight Bank Liabilities $ Bank Assets Cash and Treasury Securities Repurchase Agreements Municipal Bonds Single Family Home Mortgages $ 2,700 CMOS Commercial Loans Agricultural Loans Allowance for Loan Loss Bank Buildings Total $ 2,000 $ 1,000 $ 1,500 0% Deposits 20% Hot Money 20% Subordinated Debt 8,000 2$ 6,000 24 250 50% Common Stock 2$ 100 $ 2,500 $ 1,500 $ 2,100 $ (300) $ 2,000 $ 15,000 50% Surplus 100% Retained Earnings 2$ 300 2$ 350 100% 0% 100% 2$ 15,000 1. Calculate the minimum leverage capital for this bank.
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?
Consider the following balance sheet for Whiz Financial Services Limited: Assets K Liabilities K Cash 6.25 Equity 25.00 Short term consumer loans (1 yr maturity) 62.50 Demand deposits 50.00 Long term consumer loans (2 yr maturity) 31.25 31.25 Client Savings accounts 37.50 3 month T-Bills 37.50 3 month CDs 50.00 6 month T-Bills 43.75 3 months Bankers Acceptances 25.00 3 year T-Bonds 75.00 6 month commercial paper 75.00 10 year, fixed rate mortgages 25.00 1 year time deposits 25.00 30- year floating rate mortgages 50.00 2-year time deposits 50.00 premises 6.25 - Total 337.50 337.50 Required:A. Calculate the value of the rate sensitive assets, rate sensitive liabilities and therepricing gap over the next year. B. Calculate the expected change in the net interest income for the bank if interestrates rise by 1 percent on both rate sensitive…
The T-account below represents assets and liabilities for a bank. Use the T-account to calculate the bank's loans Loans Bonds Reserves Provide your answer below: million Assets ? $18 million $5 million Liabilities + Net Worth Deposits Net Worth $12 million $13 million
Q25 Examine the chart below which contains Bank 1’s balance sheet. If the legal reserve requirement is 40%, then excess reserves are?: Assets Liabilities Total Reserves ? Demand Deposits $600,000 Loans $300,000 Question 25 options: a) $360,000 b) $60,000 c) $240,000 d) $120,000
Consider the accompanying balance sheet for a Canadian chartered bank. If an additional $1,000,000 is deposited into the bank, then the amount of new loans (beyond its existing loans) that this chartered bank could make would be $. (Enter your response as a whole number.) Assets ($000s) Liabilities Reserves 65,000 Deposits ($000s) 370,000 Desired 18,500 Advances from 0 Bank of Canada Excess Borrowings 65,000 Loans Securities 385,000 Capital 95,000 80,000 Total Assets 530,000 Total Liabilities 530,000
Q5. First National Bank has the following balance sheet and faces a required reserve ratio on deposits of 10%: Assets Reserves $50 million Securities $50 million Loans $100 million Liabilities Deposits $150 million Bank capital $50 million 1. This banks earn $10 million as an annual after-tax profit. Calculate ROA (return on asset) and ROE (return on equity) for both banks. 2. Assume that depositors withdraw $60 million and the bank experience a $30 million loans default. How should the bank balance sheet change?
QUESTION #1 Populate the following “T-accounts” with the following data, please make sure where double entry is required $100 million in mortgage-backed securities (MBS) $200 million demand deposits $20 million in reserves held by banks $100 million in Treasury securities held by banks $50 million in Treasury securities held by the Fed $5 million in overnight borrowing by banks from the Fed Households Banks Federal Reserve Treasury ___A_______L___ ___A_______L___ ___A_____L___ ___A_____L___
Suppose that Big Bucks Bank has the simplified balance sheet shown below. The reserve ratlo Is 20 percent. Assets (1) (2) Liabilities and net worth (1) (2') Reserves 26,000 Checkable deposits $ 100,000 Securities 38,000 Loans 36,000 Instructions: Enter your answers as a whole number. a. What is the maximum amount of new loans that Big Bucks Bank can make? Using the table above, show In columns 1 and 1' how the bank's balance sheet wll appear after the bank has lent this additional amount by Inserting the new values Into the gray shaded cells of the glven table. b. By how much has the money supply changed? C. How will the bank's balance sheet appear after checks drawn for the entire amount of the new loans have been cleared agalnst the bank? Show the new balance sheet in columns 2 and 2' by Inserting the new values Into the gray shaded cells of the given table. d. Using the original figures, revisit questions a, b, and cbased on the assumption that the reserve ratio is now 15 percent.…
Consider a bank with the following balance sheet: Assets Required reserves $10 Excess reserves $27 Loans $70 Required reserves Excess reserves Loans million million million $ $ $ Assume that required reserves are 8%. In order to avoid insolvency, regulators decide to provide the bank with $27 million in bank capital. Assume that bad news about mortgages is featured in the local newspaper, causing a bank run. As a result, $40 million in deposits is withdrawn. Show the effects of the capital injection and bank run on the balance sheet. (Round your responses to the nearest whole number.) Assets Liabilities Checkable deposits Bank capital million million million Liabilities $120 million - $13 million Checkable deposits Bank capital $ $ million million

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