QUESTION 22LAST CHANCE BANK OF TOMBSTONEBALANCE SHEETASSETSLIABILITIES & NET WORTHcash in the vault:deposits at FedUS treasury bonds:demand deposits:$900,000$100,000$300,000$5,000,000$3,700,000$2,000,000loans:Building:capital stock:$2,000,000TOTALS:$7,000,000TOTALS:$7,000,00022. If the required reserve ratio is 5%, how much can this bank lend?$900,000O $1,000,000O $750,000$500,000O $400,000

Given:- Required reserve ratio= 5% Cash in the vault= $900000 Deposits at fed= $100000 Demand…

QUESTION 22 LAST CHANCE BANK OF TOMBSTONE BALANCE SHEET --- ASSETS LIABILITIES & NET WORTH cash in the vault: demand deposits: $900,000 $100,000 $300,000 $3,700,000 $2,000,000 $5,000,000 deposits at Fed US treasury bonds: loans: Building: capital stock: $2,000,000 TOTALS: $7,000,000 TOTALS: $7,000,000 22. If the required reserve ratio is 5%, how much can this bank lend? $900,000 $1,000,000 $750,000 $500,000 $400,000

QUESTION 22 LAST CHANCE BANK OF TOMBSTONE BALANCE SHEET --- ASSETS LIABILITIES & NET WORTH cash in the vault: demand deposits: $900,000 $100,000 $300,000 $3,700,000 $2,000,000 $5,000,000 deposits at Fed US treasury bonds: loans: Building: capital stock: $2,000,000 TOTALS: $7,000,000 TOTALS: $7,000,000 22. If the required reserve ratio is 5%, how much can this bank lend? $900,000 $1,000,000 $750,000 $500,000 $400,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2. Suppose Bank A initially started with $14 million in capital. A total of $156 million in checkable deposits is received. The Bank purchases securities worth of $50 million and the bank then makes a $50million commercial loan and lends another $20 million in mortgage loans. If required reserves are 15%, what does the bank balance sheet look like? (be sure to indicate required and excess reserves separately)
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9. Bank leverage Use the information presented in Northeastern Mutual Bank's balance sheet to answer the following questions. Assets Reserves Loans Bank's Balance Sheet $150 Liabilities and Owners' Equity $1,200 Deposits $600 Debt Securities $750 Capital (owners' equity) $200 $100 Suppose the owners of the bank borrow $100 to supplement their existing reserves. This would increase the reserves account and the account. This would also bring the leverage ratio from its initial value of to a new value of Which of the following is true of the capital requirement? Check all that apply. The higher the percentage of assets a bank holds as loans, the higher the capital requirement. It specifies a minimum leverage ratio for all banks. Its intended goal is to protect the interests of those who hold equity in the bank.
The table shows the commercial banks' balance sheet (aggregated over all the banks). The commercial banks' desired reserve ratio on all deposits is 10 percent and there is no currency drain. Calculate the bank's excess reserves. >>> Answer to 2 decimal places. Assets Reserves at the Fed Cash in vault Securities Loans The banks' excess reserves are $☐ million. Liabilities (millions of dollars) 2535 20 Checkable deposits 15 Savings deposits 40 95
QUESTION 23 LAST CHANCE BANK OF TOMBSTONE --- BALANCE SHET ASSETS LIABILITIES & NET WORTH demand deposits: $5,000,000 cash in the vault: deposits at Fed US treasury bonds: $900,000 $100,000 $300,000 $3,700,000 $2,000,000 loans: Building: capital stock: $2,000,000 TOTALS: $7,000,000 TOTALS: $7,000,000 23. Assume: a required reserve ratio of 20%, banks do not wish to hold excess reserves and the public does not wish to increase its cash holdings. Now assume this bank has just received an additional $100,000 in cash as a loan from another bank, such that the cash it will hold in its vault will increase to $1,000,000. What is the maximum amount of new money the banking system can create? $900,000 $400,000 $500,000 $1,000,000 $4,000,000
5. Money Multiplier: Given: Money Multiplier: 1+c rr+e+C required reserve ratio = 0.10 C = currency in circulation = $ 400 billion D =_ checkable deposits = $800 billion ER = excess reserve - $0.80 billion M = money supply_(M1) = C + D = $1,200 c = currency ratio = C/D = $400/$800= 0.5 e = excess reserve ratio = ER/D = $.80 b/ $800 b Using the formula for the money multiplier above, derive is the Money Multiplier?
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Suppose the bank expects interest rates to rise which would impact the value of theirgovernment bonds. Suppose the price of the 10 year Treasury bonds is expected tochange by 6%. Would this cause a problem for the bank? Why or why not?
7. The money creation process Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 10%. Hubert, a client of First Main Street Bank, deposits $500,000 into his checking account at First Main Street Bank. Complete the following table to reflect any changes in First Main Street Bank's T-account (before the bank makes any new loans). Assets Liabilities Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 10%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited Change in Excess Reserves Change in Required Reserves (Dollars) (Dollars) (Dollars) 500,000 Now, suppose First Main Street Bank loans out all of its new excess reserves to Eileen, who immediately uses the funds to write a check to Clancy. Clancy…
The table below shows information for United Bank. Deposits Reserves Reserve Requirement $300 million $33 million 10% 37 Which of the following statements is true concerning United Bank in the federal funds market? Multiple Choice United Bank will lend $3 million reserves in the federal funds market. United Bank will borrow $30 million reserves in the federal funds market. United Bank will lend $33 million reserves in the federal funds market. United Bank will borrow $3 million reserves in the federal funds market. # % &
Total reserves $55 billion Transactions deposits: $600 billion Cash held by public: $400 billion Bonds held by public: $400 billion Stocks held by public: $140 billion Gross domestic product: $8 trillion Interest rate: 6 percent Required reserve ratio: 0.10 How large is the money supply (M1)? How much excess reserves are there? What is the money multiplier? What is the available lending capacity?
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