Consider a balance sheet for Bank ABC$50,000 in mortgage loans, $30,000 incommercial loans, $10,000 in securities,$10,000 in reserves, with$90,000 in deposits,and bank capital of $10,000. The desiredreserve ratio is 10%. Fill the balance sheetwith the above given information. a. Calculatethe traditional leverage ratio. Is the bank wellcapitalized? b. Calculate the risk weightedcapital ratio. Is this bank fulfilling the Baselcapital requirement? c. Suppose there is abank run and Bank ABC sees 50% of itsdeposits withdrawn. Show the effect of thisbank run on the balance sheet of the bank.[Hint: In order to meet the withdrawalrequests bank will initially let go of reserves,then liquidate its securities and lastly if needbe will sell its loans]. d. Based on this exampleexplain the use of "government safety nets" toavoid bank panics and bank runs.

A balance sheet refers to a financial statement that reports a company's assets, liabilities, and…

Consider a balance sheet for Bank ABC $50,000 in mortgage loans, $30,000 in commercial loans, $10,000 in securities, $10,000 in reserves, with$90,000 in deposits, and bank capital of $10,000. The desired reserve ratio is 10%. Fill the balance sheet with the above given information. a. Calculate the traditional leverage ratio. Is the bank well capitalized? b. Calculate the risk weighted capital ratio, Is this bank fulfilling the Basel

Consider a balance sheet for Bank ABC $50,000 in mortgage loans, $30,000 in commercial loans, $10,000 in securities, $10,000 in reserves, with$90,000 in deposits, and bank capital of $10,000. The desired reserve ratio is 10%. Fill the balance sheet with the above given information. a. Calculate the traditional leverage ratio. Is the bank well capitalized? b. Calculate the risk weighted capital ratio, Is this bank fulfilling the Basel

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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18) If a bank has $100 million in total assets with $40 million in rate-sensitive assets, and $90 million in total liabilities with $50 million in rate-sensitive liabilities, then what will happen to the net interest margin (NIM) if interest rates rise by 5 percentage points, say from 10 to 15%? A) increase by 2% C) decline by $0.5 million B) decline by 0.5% D) increase by $2 million
Refer to the accompanying consolidated balance sheet for the commercial banking system. Assume the required reserve ratio is 12 percent. All figures are in billions of dollars. The maximum amount by which the commercial banking system can expand the supply of money by lending is Multiple Choice a. $250 billion. b. $600 billion. c. $450 billion. d. $350 billion.
Consider that there is only one bank and its balance sheet is as shown. Let rrD = 10%. If $100 in demand deposits were withdrawn this will deplete the bank's reserves and they will have to sell off some of its loan portfolio to make up the difference and to restore the reserves that are still required for the remaining deposit balance. After the bank has restored equilibrium, what would be the remaining loan balance? Assets Liabilities Reserves $60 Demand Deposits $500 Loans $440 O $320 O $360 O $400 O $200 O It cannot be determined precisely, but it would be less than $100.
What is Supplies of Liquid Funds? What are Laws Limiting Bank Lending and Risk?
Suppose that Big Bucks Bank has the simplified balance sheet shown below. The reserve ratio is 20 percent. Assets Reserves Securities Loans $ 27,000 38,000 35,000 Assets Reserves Securities Loans (1) $ 27,000 38,000 35.000 (2) 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 will appear after the bank has lent this additional amount by inserting the new values into the gray shaded cells of the given table. b. By how much has the money supply changed? $ (3) Liabilities and net worth Checkable deposits c. How will the bank's balance sheet appear after checks drawn for the entire amount of the new loans have been cleared against 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…
Which of the following is true? The leverage ratio is 50 meaning that for every $1 in capital the bank has $50 in assets. The leverage ratio is 45 meaning that for every $200 of capital the bank has $45 in deposits. The leverage ratio is 50 meaning that for every $200 of capital the bank has $50 in assets. The leverage ratio is 45 meaning that for every $1 of capital the bank has $45 in deposits.
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Use the following balance sheet for the ABC National Bank in answering the next question(s). Assume the required reserve ratio is 20 percent. Assets Liabilities and net worth Reserves$27,000 Checkable deposits$110,000 Loans50,000 Capital stock200,000 Securities33,000 Property200,000
Assume that the following asset values (in millions of dollars) exist in Ironmania: Category Value (Millions) Federal Reserve Notes in circulation $700 Money market mutual funds (MMMFS) held by individuals 400 Corporate bonds 300 Iron ore deposits 50 Currency in commercial banks 110 Savings deposits, including money market deposit accounts (MMDAS) 140 Checkable deposits 1,600 Small-denominated (less than $100,000) time deposits 100 Coins in circulation 40 Instructions: Enter your answers as a whole number. a. What is MM in Ironmania? million b. What is M2 in Ironmania? million
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With Rp. 50.000.000 as capital, Bank Jatinangor opened for the first time. Then, the bank accept Rp. 200.000.000 in deposits. Assume the reserve requirements is 20 percent. The rest of Bank Jatinangor’s assets is used to make bank loans. a. Show a T-account for Bank Jatinangor b. What is Bank Jatinangor’s leverage ratio and what is it means?
Question 6 Which of the following is NOT an operating instrument? O nonborrowed reserves federal funds interest rate discount rate