ill leave a like! City Bank currently has $500 million in transaction deposits on its balance sheet. Fed just cut the reserve requirement ratio from 10% to 6%. If City bank converts 60% of its excess reserves to loan and producers of goods or services only return S0% of these funds to City bank as transaction deposits, the total change in deposits (with no drains) would be O 19.40 O 28.92 O 15.15 O 21.43

ill leave a like! City Bank currently has $500 million in transaction deposits on its balance sheet. Fed just cut the reserve requirement ratio from 10% to 6%. If City bank converts 60% of its excess reserves to loan and producers of goods or services only return S0% of these funds to City bank as transaction deposits, the total change in deposits (with no drains) would be O 19.40 O 28.92 O 15.15 O 21.43

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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In the example below, we will use year-end assets. Bank A receives $70 in deposits at 5% and, together with 40 in equity, makes a loan of $90 at 7%. The remaining of assets is G-Bond. We will ignore taxes for the moment. Bank A Cash Reserves for Deposit ? Loan 7% $90 G-Bond 5% ? Deposits 5% $70 Equity $40 Total Assets $? Total Equity and Deposit $110 If Cash Reserves for deposit is at least 8% of the deposit under the Basel Accord, how much of the G-Bond Bank A should purchase? $17 $14 $16 $18 $20 $15 $19 $21
The Fed conducts an open market operation and increase a bank's excess reserves by $7,000. Explain the first five rounds of the money creation process if the desired reserve ratio is 20% and if people keep no currency outside of the banking system. (5 points) Rounds Deposits Reserves Loans 1 $7,000 $1,400 $5,600 2 $5,600 $1,120 $4,480 345 $4,480 $896 $3,584 $3,584 $716.8 $2,867.2 $2,867.2 $573.44 $2,293.76
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Suppose the Royal Bank of Pullman has the following assets: cash = 100 (with modified duration of 0) and a 10-year loan worth $900 (with modified duration of 9). Its liabilities are a CD worth $800 (with a modified duration of 2). If interest rates rise by 1% the bank's equity will fall by ________ %. A. 9 B. 5.6 C. 2 D. 6.5
None
Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 20%. The Bank of Canada buys a government bond worth $750,000 from Eric, a client of First Main Street Bank. He deposits the money into his chequing account at First Main Street Bank. NOTE: the options for the LEFT dropdown question for ASSETS are (building and furniture or deposits or loans or networth or reserves) the options for the RIGHT dropdown question for ASSETS are ($150,000 or $600,000 or $750,000 or $1,800,000) the options for the LEFT dropdown question for LIABILITIES are (building and furniture or deposits or loans or networth or reserves) the options for the RIGHT dropdown question for LIABILITIES are ($150,000 or $600,000 or $750,000 or $1,800,000) the VERY last dropdown question at the bottom choices are ($375,000 or $3,000,000 or $3,750,000)
Consider two local banks. Bank A has 87 loans outstanding, each for $1.0 million, that it expects will be repaid today. Each loan has a 3% probability of default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of $87 million outstanding, which it also expects will be repaid today. It also has a 3% probability of not being repaid. Calculate the following: a. The expected overall payoff of each bank. b. The standard deviation of the overall payoff of each bank. a. The expected overall payoff of each bank. The expected overall payoff of Bank A is $ million. (Round to the nearest integer.)
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