Need help with this question solution general accounting Suppose the required reserve ratio is .15 andindividuals hold no cash. Total bank depositsare $100 million and the banks hold $20 millionin reserves. How much more money can thebank create if it does not hold excess reserves?A. $33 millionB. $66 millionC. $100 millionD. $667 million

Step 1: Define Total bank depositsTotal bank deposits are the total sum of money which are submitted…

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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What is the maximum amount of money created from a $3 million deposit in the banking system if the required reserve ratio is 0.05? $0.15 million O $30 million $60 million $31.58 million
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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
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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?
2. Use the table below to answer questions a,b and c. rr = 20% Assets Liabilities R = 20,000 D = 100,000 S=70,000 L = 50,000 OE=40,000 TA-140,000 TL = 140,000 a) Using a new balance sheet, show how the balance sheet above will change if a customer deposits $10,000 cash. Assume that the bank holds exactly the amount of reserves required. b) How much will the total money supply potentially change as a result of the $10,000 cash deposit, once the full money multiplier process is completed? Show your calculation.
Suppose a bank has $1,000 in deposits and $100 in reserves. If the desired reserve ratio is 5 percent, how much can this bank increase its loans? O a. $50 O b. $80 O c. $0 O d. $400 O e. $100
2. Your bank has the following balance sheet: Assets Reserves Securities Loans Liabilities Checkable deposits $200 million Bank capital 50 million If the required reserve ratio is 10%, what actions should the bank manager take if there is an unexpected deposit outflow of $50 million? Make sure to show your work. $50 million 50 million 150 million
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We have the following information about a bank's balance sheet. Rate sensitive assets = $10,000,000 Fixed-rate assets = $20,000,000 Rate sensitive liabilities = $4,000,000 Fixed-rate liabilities = $26,000,000 Let's do a simple gap analysis. If the interest rate falls by 5 percent, O a. The bank will lose $300,000. O b. The bank will lose $500,000. O c. The bank will lose $200,000. O d. The bank will gain $300,000. O e. The bank will gain $200,000.
2. (Credit Cycles) Consider a bank with the balance sheet given below. Assets Liabilities Reserves $10 million Securities $50 million Deposits Bank Capital Loans $ 30 million $ 80 million Answer the following questions. (a) Compute the bank capital (the value of assets minus liabilities). (b) Assume that there was a default in mortgages loans by 10 million dollars worth. Draw the resulting bank balance sheet. 2 (c) Because of the decreased bank capital, the bank has to sell their assets by 10 million dollars. Suppose that it decides to sell securities. Since many other banks are in the same situation and they sold securities, too. Because of the surge of supply, the price of the securities had dropped and it caused the depreciation of bank's securities by 5 million dollars worth. Draw the resulting bank balance sheet. (d) Further Reading Similarly to this problem, an occurrence of asset deprecia- tion causes deterioration of bank balance sheet and that further causes con- traction in…
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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