Consider the following balance sheet for XYZ Community Bank: Assets Reserve T-bonds Agency Mortgage Commercial Consumer TA |S million Duration Risk weight Liabilities O Deposits O Money mkt 0.2 CD 0.5 Borrowings 1 Loan loss reserve 1 Capital TL $ million Duration 4 40 0.2 0.8 2.5 이1 10 5 20 3 18 10 4 15 30 2 2 40 100 2.5 5 100 (i) Interest rate was 6%. However, the rate has just increased by 1%. What would happen to net worth (capital)? (ii) Required reserve for deposits is 10%. The bank experiences a deposit withdrawal for S1 million. Calculate the current reserve and required reserve after the withdrawal. Does the bank have enough reserve to meet the required reserve? (iii)Calculate the risk-weighted assets and risk-weighted capital ratio.
Consider the following balance sheet for XYZ Community Bank: Assets Reserve T-bonds Agency Mortgage Commercial Consumer TA |S million Duration Risk weight Liabilities O Deposits O Money mkt 0.2 CD 0.5 Borrowings 1 Loan loss reserve 1 Capital TL $ million Duration 4 40 0.2 0.8 2.5 이1 10 5 20 3 18 10 4 15 30 2 2 40 100 2.5 5 100 (i) Interest rate was 6%. However, the rate has just increased by 1%. What would happen to net worth (capital)? (ii) Required reserve for deposits is 10%. The bank experiences a deposit withdrawal for S1 million. Calculate the current reserve and required reserve after the withdrawal. Does the bank have enough reserve to meet the required reserve? (iii)Calculate the risk-weighted assets and risk-weighted capital ratio.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Consider the following balance sheet for XYZ Community Bank:
Assets
Reserve
T-bonds
Agency
Mortgage
S million Duration Risk weight Liabilities
O Deposits
O Money mkt
$ million Duration
4
40
10
5
20
0.2
6
3
0.2 CD
18
0.8
0.5 Borrowings
1 Loan loss reserve
1 Capital
TL
10
4
15
2.5
Commercial
30
2
2
Consumer
TA
40
2.5
100
100
(i) Interest rate was 6%. However, the rate has just increased by 1%. What would happen
to net worth (capital)?
(ii) Required reserve for deposits is 10%. The bank experiences a deposit withdrawal for
S1 million. Calculate the current reserve and required reserve after the withdrawal.
Does the bank have enough reserve to meet the required reserve?
(ii1)Calculate the risk-weighted assets and risk-weighted capital ratio.
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