If the bank experience a $50,000 sudden liquidity drain, what will be the impact on the bank’s balance sheet?
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If the bank experience a $50,000 sudden liquidity drain, what will be the impact on the bank’s
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- Under normal liquidity management, deposit drains and loan commitment disbursement should not cause any major concerns for the financial institution. Major liquidity problems can arise where deposit drains are abnormally large; unexpected abnormal deposit drains (shocks) these may occur for all of the following reasons EXCEPT: Question 20Answer a. The sudden withdrawal of funds by a significant number of depositors due to a major financial crisis taking place in the local economy. b. The sudden change in preference by investors from holding stocks and bonds to certain bank related deposits instruments. c. Speculations of ongoing liquidity problems of a particular financial institution compared to its competitors´. d. The recent bankruptcy of a domestic bank sparks fear amoung depositors of a possible similar occurrence at another financial institution.As a bank manager, you conclude that the bank has a capital shortfall and should decrease the equity multiplier (i.e., increase the capital ratio) to prevent bank failure. Which of the following is one of things you can do to manage capital adequacy of the bank? a.Acquiring more reserves through borrowing from fed funds loansb.Selling the bank's holding of mortgage-backed securities and using the proceeds to decrease liabilitiesc.Repurchasing shares of the bankd.Increasing dividend payout ratio to reduce retained earnings.If a bank has a negative gap, it is likely that it has a: a. positive duration gap. b. negative duration gap. c. low stock price. d. high return on assets.
- Bank overdraft is reported in the current asset section of the balance sheet. * True FalseConstruct a bank balance sheet with the following items : reserves , deposits , loans , securities , capital , and debt . Choose values so that the reserve -deposit ratio is 10 percent and the leverage ratio is 10. Give an example of a change in asset values that would push bank capital to zero . What happens when bank capital is gone ?What are bank assets used for? Bank liabilities are the sources of bank ________? Bank capital is the contribution of the bank's owners; it acts as a cushion against what? Banks make a profit for their owners. Measures of a bank's profitability include what four things? Banks' off-balance-sheet activities have become increasingly important in recent years. What are these two things? Banks face several types of risk in day-to-day business. List them:
- all of the following statements about a bank's capital are correct except: bank capital is the cushion a bank has against a sudden drop in the value of its assets a bank is more profitable the more capital it holds bank capital decreases as interest rate increase bank capital is what would be left after a bank's owner sold all the assets and paind off all the liabilitiesA6) Finance For a bank, what is the tradeoff between having high vs. low capital reserve?If banks suddenly start to pay interest on all demand deposits, their interest rate margin would: a) become larger b) become smaller c) be unaffected
- Fractional reserve banking refers to a banking system in which bank loans are less than bank reserves. bank deposits are less than bank reserves. bank reserves are less than total deposits. bank reserves are only a fraction of required reserves.ThstructionS: 1. Prepare a bank reconciliation. Deaver Consulting Bank Reconciliation October 31, 20Y6 Cash balance according to bank statement 31,095 Add: Deposit of October 31, not recorded by bank 4,120 35,215 Add: Outstanding checks 10,125 Deduct: Bank error in charging check as $230 instead of $320 90 10,215 Adjusted balance 25,000 Cash balance according to Deaver Consulting 15,750 Add: Proceeds of note collected by bank, including $400 interest 10,000 10.400 Deduct: Error in recording check by the company as $120 instead of $1,200 1,080 Deduct: Bank service charges 70 1,150 Adjusted balance 25,000 2. Illustrate the effects on the accounts and financial statements of the bank reconciliation. If no account or activity is affected, select "No effect" from the dropdown and leave the coA deposit of 500 was credited by the ban for 5000 What is the influence of the bank error? What we should do? a. Add 4500 on the bank balance b. Decrease 4500 on the bank balance
