Complete the following T-account for BSB. Beleaguered State Bank Assets Liabilities Reserves million Deposits million Loans million Now suppose that BSB's largest depositor withdraws $20 million in cash from her account. BSB decides to restore its reserve ratio by reducing the amount of loans outstanding. Complete BSB's new T-account after it has taken this action. Releag.uered State

Complete the following T-account for BSB. Beleaguered State Bank Assets Liabilities Reserves million Deposits million Loans million Now suppose that BSB's largest depositor withdraws $20 million in cash from her account. BSB decides to restore its reserve ratio by reducing the amount of loans outstanding. Complete BSB's new T-account after it has taken this action. Releag.uered State

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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7. The money creation process Suppose Southeast Mutual Bank, Walls Fergo Bank, and PJMorton Bank all have zero excess reserves. The required reserve ratio is presently set at 25%. Tim, a Southeast Mutual Bank customer, deposits $1,800,000 into his checking account at the local branch. Complete the following table to reflect any changes in Southeast Mutual Bank's T-account (before the bank makes any new loans). Assets Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 25%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited Change in Excess Reserves (Dollars) (Dollars) 1,800,000 Liabilities Change in Required Reserves (Dollars) Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Rosa, who immediately uses the funds to write a check to Nick. Nick deposits the funds immediately into his checking account at Walls Fergo Bank. Then Walls…
The money creation process Suppose Southeast Mutual Bank, Walls Fergo Bank, and PJMorton Bank all have zero excess reserves. The required reserve ratio is presently set at 20%. Brian, a Southeast Mutual Bank customer, deposits $1,500,000 into his checking account at the local branch. Complete the following table to reflect any changes in Southeast Mutual Bank's T-account (before the bank makes any new loans). Assets Liabilities 2 categories under Assets: 1. Building and furniture, Deposits, Loans, Net worth or Reserves 2. $300,000 or $1,200,000 or $1,500,000 or $3,600,000 2 Categories under Liabilities: 1. Building and furniture, Deposits, Loans, Net worth or Reserves 2. $300,000 or $1,200,000 or $1,500,000 or $3,600,000 Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 20%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited Change in…
You observe the following details about a bank (amounts in million) net interest income: $1,250 net noninterest income: $200 operating expenses: $900 loan loss provisions: $170 gains from trading: $75 Taxes: $150 Total assets: $17,000 Equity: $2,200 What is the bank's ROE? Write your answer expressed as a %, and round to two decimals. For instance, if you think the ROE is 0.0856237, then you write 8.56 below
7. The money creation process Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 20%. Van, a client of First Main Street Bank, deposits $1,500,000 into his checking account at First Main Street Bank. Complete the following table to reflect any changes in First Main Street Bank's T-account (before the bank makes any new loans). Assets Liabilities Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 20%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited Change in Excess Reserves Change in Required Reserves (Dollars) (Dollars) (Dollars) 1,500,000 Now, suppose First Main Street Bank loans out all of its new excess reserves to Sharon, who immediately uses the funds to write a check to Paolo. Paolo deposits the funds immediately into his checking account at Second Republic Bank.…
A bank has the following balance sheet. It expects a net deposit drain of $500,000. Assets Liabilities and Equity Cash $300,000 Deposits $3,115,000 Loans 2,000,000 Equity 385,000 Securities 1,200,000 Total Asset $3,500,000 Total Liabilities and Equity $3,500,000 What is a net deposit drain and why is it of concern for the bank? Show the bank’s balance sheet if it uses stored liquidity to offset the expected drain.
thempt 1 You just deposited $4,000 in cash into a checking account at the local bank. Assume that banks lend out all exces reserves and there are no leaks in the banking system. That is, all money lent by banks gets deposited in the banking system. Round your answers to the nearest dollar. If the reserve requirement is 12%, how much will your deposit increase the total value of checkable bank deposits? 0.14 Incamect If the reserve requirement is 4%, how much will your deposit increase the total value of checkable deposits? 0.04 $. Inomect Increasing the reserve requirement increases. the Incorect money supply.
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
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?
We have the following information about a bank's balance sheet. Rate sensitive assets = $10,000,000 Fixed-rate assets = $20,000,000 Rate sensitive liabilities = $4,000,000 Fixed-rate liabilities = $26,000,000 Let's do a simple gap analysis. If the interest rate falls by 5 percent, O a. The bank will lose $300,000. O b. The bank will lose $500,000. O c. The bank will lose $200,000. O d. The bank will gain $300,000. O e. The bank will gain $200,000.
Show new balance sheet if bank uses purchased liquidity management to offset expected drain of $12 million net deposit. Also explain effect on the size and composition of assets and liab
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