Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 20 percent. Ifyou deposit $18,000 into First Jayhawk Bank,a. First Jayhawk's required reserves increase by $1,800.b. First Jayhawk will be able to lend out $16,200.c. First Jayhawk's assets and liabilities both will increase by $18,000.d. All of the above are correct.

The reserve required is the amount of deposit that is to be retained and can not use to give the…

Answered: Suppose banks desire to hold no excess…

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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On April 2, 2020, shortly after the $7.5 million deposit outflow, Key Bank had borrowed the needed fund in the fed funds market to cover the shortfall in reserves for the remainder of the month (29 days, from 4/2 to 4/30). The required yield on a discount basis was 1.5%. On April 30, 2020, Key Bank finally received the first required payments from its mortgages, loan, and T-bills, and it also paid off its fed funds loan. Key Bank was required to establish a loan loss reserve at 0.5% of the commercial loan value and the bank was in the 35% tax bracket. The bank had not engaged in any off-balance-sheet activities. Question: What was the dollar amount of total mortgages on the balance sheet as of April 30, 2020? Group of answer choices $71,925,512.95 $72,000,000.00 $71,865,512.95 $71,875,523.96 $71,789,863.20
(Related to Checkpoint 7.1) (Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 3.8 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability 0.10 0.40 0.40 0.10 (Click on the icon Return - 6% 1% 6% 8% in order to copy its contents into a spreadsheet.) a. The investment's expected return is %. (Round to two decimal places.)
Assume a 8% reserve requirement, and government wishes to expand the money supply by 4,124,245,405 dollars. What is the total increase in bank deposits required, in theory?
If R = 25%, actual reserves are $2,000 and checkable deposits are $9,000, then the monetarymultiplier is ____, required reserves are $____, excess reserves are $____, and the bankingsystem could potentially expand the money supply by $____.
A bank has $400 million in demand deposits and desires a 20 percent reserve ratio. How much will it hold as reserves? O a. $200 million O b. $120 million O c. $80 million O d. $500 million
17. Assume that a bank obtains most of its funds from long-term borrowed funds such as Federal Home Loan Bank borrowings. The bank's assets are in the form of loans with rates that adjust affected if interest rates every three months. In the next three months, the bank would be increase. A. negatively. B. favorably. C. unaffected.
On April 2, 2020, shortly after the $7.5 million deposit outflow, Key Bank had borrowed the needed fund in the fed funds market to cover the shortfall in reserves for the remainder of the month (29 days, from 4/2 to 4/30). The required yield on a discount basis was 1.5%. On April 30, 2020, Key Bank finally received the first required payments from its mortgages, loan, and T-bills, and it also paid off its fed funds loan. Key Bank was required to establish a loan loss reserve at 0.5% of the commercial loan value and the bank was in the 35% tax bracket. The bank had not engaged in any off-balance-sheet activities. Question: According to the balance sheet as of April 30, 2021, was Key Bank complying with the risk weighted capital requirement set by Basel 1? Group of answer choices The bank's tier 1 capital, but not total capital, meets the minimum requirement. The bank's total capital, but not tier 1 capital, meets the minimum requirement. Neither tier 1 capital nor total capital of the…
In year one, a bank facing reinvestment risk earns 11 percent on its assets and pays 10 percent on its liabilities. In year two, the bank had a negative profit spread of 100 basis points. Which of the following is true? In year two, a. rates rose 100 basis points. b. rates rose 200 basis points. c. rates fell 100 basis points. d. rates fell 200 basis points. e. None of these options are correct.
Suppose a bank currently has $250,000 in deposits and $27,000 in reserves. The required reserve ratio is 10%. If at the end of the day, there is an unexpected withdrawal of $4,000 in reserves, what is the bank's resulting reserve ratio (expressed as a %)? Using the information from the prior problem, how much would the bank need to borrow in either the Fed Funds market or at the discount window, to be in complicance with the required reserve ratio?
Suppose the Federal Reserve increases deposits at financial institutions by $50 billion through its open market operations. If the reserve requirement for all deposits is 8%, what is the maximum impact the Fed's actions can have on total deposits?a. $575 billion increaseb. $54.3 billion increasec. $625 billion increased. An increase greater than $1 trillione. Total deposits would decrease, but there is not enough information to compute theamount.
D1. Please redraw the balanced T-account.
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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