I won't to this question answer general Accounting Suppose the required reserve ratio is .15 and individualshold no cash. Total bank deposits are $100 million and thebanks hold $20 million in reserves. How much more moneycan the bank create if it does not hold excess reserves?A. $33 millionB. $66 millionC. $100 millionD. $667 million

Approach to solving the question: Step 1: Calculate Required Reserves:Required Reserve Ratio =…

Answered: Suppose the required reserve ratio is…

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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Challenge Problem. Assume that the public in the small country of Sylvania does not hold any cash. Commercial banks, however, hold 10 percent of their checking deposits as excess reserves, regardless of the interest rate. In the questions that follow, the "money multiplier" is given by 1/ (RR+ ER), where RR = the percentage of deposits that banks are required to keep as reserves ER = the percentage of deposits that banks voluntarily hold as excess reserves Consider the balance sheet of one of several identical banks Assets Liabilities and Net Worth Reserves 600 Checking Deposits 2,400 Loans 1,800 Net Worth Total Assets 2,400 Liabilities and Net Worth 2,400
Assume that a bank receives a deposit of $1,000 in cash, puts aside $200 as required reserves, and makes a loan of $800, these transactions imply that: the money multiplier is 10. the money multiplier is 5. the money multiplier is 4. the money multiplier is 2. the money multiplier is 2.
a) Bank A has the following balance sheet (in millions): Assets Cash Securities Loans Total assets $70 The bank is expecting a $12 million net deposit drain. Liabilities and equity Deposits Equity Total liabilities and equity $5 10 55 $62 9 $70 ii) Show the new balance sheet if the bank uses stored liquidity management to offset the expected drain. Also, explain the effect on the size and composition of assets and liabilities.
Below is the balance sheet for a bank. Under "Other" it has listed "$X" just think of this as the dollar amount needed to make the balance sheet balance. It is not important what that value is for this question. AssetsLiabilitiesReserves 40Deposits 215Loans 160 Securities 40Other $X Using the balance sheet above, find the level of excess reserves this bank is holding if the required reserve ratio = 8%(Give answers to 2 decimal places as needed)
If a bank has $200,000 of checkable deposits, a required reserve ratio of 20 percent, and it holds $80,000 in reserves, then the maximum deposit outflow it can sustain without altering its balance sheet is A) $50,000. B) $40,000. C) $30,000. D) $25,000. Answer: A How to solve it?
a) Bank A has the following balance sheet (in millions): Assets Cash Securities Loans Total assets $5 10 55 $70 Liabilities and equity Deposits Equity Total liabilities and equity The bank is expecting a $12 million net deposit drain. $62 8 $70 i) Show the new balance sheet if the bank uses purchased liquidity management to offset the expected drain. Also, explain the effect on the size and composition of assets and liabilities ii) Show the new balance sheet if the bank uses stored liquidity management to offset the expected drain. Also, explain the effect on the size and composition of assets and liabilities.
Imagine that the banking system's balance sheet can be represented by the following t-account: Assets LIABILITIES AND NET WORTH RESERVES 200 DEPOSITS 2000 BONDS 800 LOANS 1000 NETWORTH 0 TOTAL 2000 TOTAL 2000 Assuming the bank is "loaned up" the required reserve ratio is ___________ (round to two decimal places) The money multiplier is ___________ Imagine that the central bank uses open market operations to buy $300 worth of bonds from the bank above. Fill in the following t-account assuming that the money multiplier has taken its full effect: ASSETS LIABILITIES AND NET WORTH RESERVES __?___ DEPOSITS ___?__ BONDS ____?___ LOANS ____?____ NET WORTH ___?___ TOTAL _____?______ TOTAL ___?___
2. Initially, the amount of currency was 500 and the amount of deposits was zero. The required reserve ratio is 10%. Answer questions below. 2.b. The public deposited all of 500 into a bank. This started the money creation process. 2.b.i. Choose correct words about the process. "The process stops when all of new deposited currencies are (used as reserves / loaned out)." 2.b.ii. Compared to before the public deposited the currencies, how much would be the increase in deposits? 2.b.iii. Compared to before the public deposited the currencies, how much would be the increase in money supply?
Consider the simple Financial Intermediary (FI) balance sheet as shown below (in millions of dollars). Before the withdrawal Cash Assets Corporate Loans Total Amount $30 $170 $200 Liabilities/Equity Amount Deposits Equity Total $170 $30 $200 Suppose that depositors unexpectedly withdraw $70 million in deposits and the FI receives no new deposits to replace them. Assume that the FI cannot borrow any more funds in the short-term money markets, and because it cannot wait to get better prices for its assets in the future (as it needs the cash now to meet immediate depositor withdrawals), the FI has to sell any nonliquid assets (corporate loans) at 75 cents on the dollar. What will be the equity (in millions of dollars) of the FI after adjustments are made for the $70 million of deposit withdrawals? Assume no minimum cash reserve requirements.
no handwritten notes!
The bank that you own has the following balance sheet: Assets Liabilities $ 60 million Deposits $120 million Bank capital $420 million Reserves $500 million $100 million Securities Loans a) Record a bookkeeping immediately after the bank suffers a deposit outflow of $50 million when a required reserve ratio on deposits is 10%. What problem do you see on the T-account after the event? Assets Liabilities Reserves Deposits Bank capital Securities Loans b) What action(s) you want to take to rectify the situation? Make your suggestion(s) in terms of the T-account and explain them. Assets Liabilities
Consider an economy in which banks do not hold excess reserves; non-bank entities hold all money in the form of checkable deposits; and the required reserve ratio is 15 percent. If the monetary authority (ex the Fed) writes a $200,000 check to a member of the non-bank public, checkable deposits in this economy would increase by $200, 000. $2,000,000. O $13, 333,333. O $1,333,333.

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Suppose the required reserve ratio is .15 and individuals hold no cash. Total bank deposits are $100 million and the banks hold $20 million in reserves. How much more money can the bank create if it does not hold excess reserves? A. $33 million B. $66 million C. $100 million D. $667 million