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The following table shows the initial balance sheet of a hypothetical bank. There are no reserves requirements (the required reserve ratio is zero). However, reserves cannot go below zero. The Fed wouldn't like that. The borrowings are either from the Fed or from other banks. Assets Liabilities & NW Reserves $20.00 Deposits $140.00 Securities $20.00 Borrowings $30.00 Loans $160.00 Bank Capital $30.00 Total $200.00 Total $200.00 Start from the initial balance sheet above. Suppose that the firm makes an after tax profit of $6. This results in the following rates of returns for this bank: percent Rate of Return on Assets= percent Rate of Return on Equity %3D

The following table shows the initial balance sheet of a hypothetical bank. There are no reserves requirements (the required reserve ratio is zero). However, reserves cannot go below zero. The Fed wouldn't like that. The borrowings are either from the Fed or from other banks. Assets Liabilities & NW Reserves $20.00 Deposits $140.00 Securities $20.00 Borrowings $30.00 Loans $160.00 Bank Capital $30.00 Total $200.00 Total $200.00 Start from the initial balance sheet above. Suppose that the firm makes an after tax profit of $6. This results in the following rates of returns for this bank: percent Rate of Return on Assets= percent Rate of Return on Equity %3D

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Monetary System
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The following table shows the initial balance sheet of a hypothetical bank. There are no reserves requirements (the required reserve ratio is zero). However, reserves cannot go below zero. The Fed wouldn't like that. The borrowings are either from the Fed or from other banks. Assets Liabilities & NW Reserves $20.00 Deposits $140.00 Securities $20.00 Borrowings $30.00 Loans $160.00 Bank Capital $30.00 Total $200.00 Total $200.00 Start from the initial balance sheet above. Suppose that the firm makes an after tax profit of $6. This results in the following rates of returns for this bank: percent Rate of Return on Assets= percent Rate of Return on Equity:
Transcribed Image Text:The following table shows the initial balance sheet of a hypothetical bank. There are no reserves requirements (the required reserve ratio is zero). However, reserves cannot go below zero. The Fed wouldn't like that. The borrowings are either from the Fed or from other banks. Assets Liabilities & NW Reserves $20.00 Deposits $140.00 Securities $20.00 Borrowings $30.00 Loans $160.00 Bank Capital $30.00 Total $200.00 Total $200.00 Start from the initial balance sheet above. Suppose that the firm makes an after tax profit of $6. This results in the following rates of returns for this bank: percent Rate of Return on Assets= percent Rate of Return on Equity:
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