The table below is the current balance sheet for the Maple Leafs Bank. Answer the following questions assuming that the bank's target reserve ratio is 10%. Reserves Loans Assets Securities Fixed assets Total $120,000 $ 680,000 250,000 350,000 $1,400,000 a. This bank is over-reserved by $30,000 b. Suppose that a loan, in the amount of the (1) 90,000 $ 710,000 250,000 350,000 1,400,000 (2) Liabilities / Equity Demand deposits Shareholders' equity Total $900,000 $ 500,000 $1,400,000 (1) 900,000 $ 500,000 1,400,000 (2)
The table below is the current balance sheet for the Maple Leafs Bank. Answer the following questions assuming that the bank's target reserve ratio is 10%. Reserves Loans Assets Securities Fixed assets Total $120,000 $ 680,000 250,000 350,000 $1,400,000 a. This bank is over-reserved by $30,000 b. Suppose that a loan, in the amount of the (1) 90,000 $ 710,000 250,000 350,000 1,400,000 (2) Liabilities / Equity Demand deposits Shareholders' equity Total $900,000 $ 500,000 $1,400,000 (1) 900,000 $ 500,000 1,400,000 (2)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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11
The table below is the current balance sheet for the Maple Leafs Bank. Answer the following questions assuming that the bank's target
reserve ratio is 10%.
30
Reserves
Loans
Assets
Securities
Fixed assets
Total
$120,000 $
680,000
250,000
350,000
$1,400,000
(1)
90,000 $
710,000
250,000
350,000
1,400,000
Reserves
(2)
$1,200,000 $
a. This bank is over-reserved
by $30,000
b. Suppose that a loan, in the amount of the excess reserves found in part (a), is made to Sats Mundin. Show the resulting balance
sheet in columns (1) in the table above.
Liabilities / Equity
Demand deposits
Shareholders' equity
Total
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c. Suppose that Sats immediately spends all of his loan by writing a cheque to his psychologist, Freda Freud. She deposits it in her
account, which happens to also be at the Maple Leafs Bank.
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The bank is now over-reserved by $30,000
d. Suppose, instead, that the bank makes a loan for the amount in your answer in part (a), which then clears against the Maple Leafs
Bank. Show the resulting balance sheet in columns (2) in the table above.
e. The Bank now has excess reserves of $30,000
Suppose that there are a total of 9 other banks in the economy and that the balance sheet for the whole banking system is presented
in the table below. Assume that each of the other banks also has a target reserve ratio of 10%.
Assets
(1 all)
Liabilities / Equity
Demand deposits
11 of 14
222
$900,000 $
500,000
Next >
9
$1,400,000
$9,000,000
$
(1 311)
(1)
900,000 $
500,000
1,400,000
(2)
He
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