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I need help on b,c,d

I need help on b,c,d

FINANCIAL ACCOUNTING
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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I need help on b,c,d

2. The following is the balance sheet for Raymond Bank, one of many commercial banks in a country. Assets Liabilities and Equity Reserves $5.000 Demand deposits $20.000 Business loans $10,000 Student loans $8,000 Government securities $2,000 Equity (Net worth) $5,000 Total assets $25,000 Total liabilities and equity $25,000 Assume a 10 percent reserve requirement. (a) Calculate Raymond Bank's required reserves. (h) Calculate the maximum amount of additional loans that Raymond Bank can make without selling its holdings of government securities. (c) Assuming that Raymond Bank and other banks now lend out all excess reserves, calculate the maximum possible change in the following. (i) Demand deposits throughout the banking system (ii) Total reserves throughout the banking system (d) Suppose that the country's central bank purchases $1,000 of Raymond Bank's holdings of government securities as part of its open-market operations. Do Raymond Bank's required reserves initially increase, decrease, or remain the same as a result of the central bank's purchase? Explain.
Transcribed Image Text:2. The following is the balance sheet for Raymond Bank, one of many commercial banks in a country. Assets Liabilities and Equity Reserves $5.000 Demand deposits $20.000 Business loans $10,000 Student loans $8,000 Government securities $2,000 Equity (Net worth) $5,000 Total assets $25,000 Total liabilities and equity $25,000 Assume a 10 percent reserve requirement. (a) Calculate Raymond Bank's required reserves. (h) Calculate the maximum amount of additional loans that Raymond Bank can make without selling its holdings of government securities. (c) Assuming that Raymond Bank and other banks now lend out all excess reserves, calculate the maximum possible change in the following. (i) Demand deposits throughout the banking system (ii) Total reserves throughout the banking system (d) Suppose that the country's central bank purchases $1,000 of Raymond Bank's holdings of government securities as part of its open-market operations. Do Raymond Bank's required reserves initially increase, decrease, or remain the same as a result of the central bank's purchase? Explain.
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