Homework Help is Here – Start Your Trial Now!
Business
Economics
Tuesday Wednesday Thursday Friday 11th 12th 13th 14th $500 $ 450 $ 480 $ 460 EXAMPLE 13-2 Computation of Daily Average Required Reserves Consider ABC Bank's reserve manager, who wants to assess the bank's minimum cash reserve requirement target. The manager knows the bank's net transaction accounts bal- ance at the close of the banking day on each of the 14 days over the period Tuesday, June 30, to Monday, July 13. Consider the realized net transaction account positions of ABC Bank in Table 13-25. Net transaction accounts The average daily reserves at the Fed for the 14-day reserve maintenance period have been $43.5 million per day, and the average vault cash for the computation period has been estimated to be $1 million per day. The minimum daily average reserves that a bank must maintain is computed as a percentage of the daily average net transaction accounts held by the bank over the two-week computation period, where Friday's balances are carried over for Saturday and Sunday. The minimum daily average for ABC Bank to hold against the daily average of $1,350.70 million in net transaction accounts is calculated as follows (amounts in millions): Daily average net transaction accounts x Reserve percentage = Daily average reserves required $15.2 $110.2-$15.2 $1,350.7-$110.2 0% $ 0.000 3 2.850 124.050 10 Minimum average reserves to be held $126.900 monis). Monday Tuesday Wednesday Thursday Friday 20th $ 460 17th $480 18th $ 500 19th $ 470 21th $ 450 a. What is the amount of the average daily required reserves to be held by the bank during the maintenance period? b. Is the bank in compliance with the requirements? Monday 24th $ 440

Tuesday Wednesday Thursday Friday 11th 12th 13th 14th $500 $ 450 $ 480 $ 460 EXAMPLE 13-2 Computation of Daily Average Required Reserves Consider ABC Bank's reserve manager, who wants to assess the bank's minimum cash reserve requirement target. The manager knows the bank's net transaction accounts bal- ance at the close of the banking day on each of the 14 days over the period Tuesday, June 30, to Monday, July 13. Consider the realized net transaction account positions of ABC Bank in Table 13-25. Net transaction accounts The average daily reserves at the Fed for the 14-day reserve maintenance period have been $43.5 million per day, and the average vault cash for the computation period has been estimated to be $1 million per day. The minimum daily average reserves that a bank must maintain is computed as a percentage of the daily average net transaction accounts held by the bank over the two-week computation period, where Friday's balances are carried over for Saturday and Sunday. The minimum daily average for ABC Bank to hold against the daily average of $1,350.70 million in net transaction accounts is calculated as follows (amounts in millions): Daily average net transaction accounts x Reserve percentage = Daily average reserves required $15.2 $110.2-$15.2 $1,350.7-$110.2 0% $ 0.000 3 2.850 124.050 10 Minimum average reserves to be held $126.900 monis). Monday Tuesday Wednesday Thursday Friday 20th $ 460 17th $480 18th $ 500 19th $ 470 21th $ 450 a. What is the amount of the average daily required reserves to be held by the bank during the maintenance period? b. Is the bank in compliance with the requirements? Monday 24th $ 440

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
See similar textbooks
icon
Related questions
Question

Don't provide handwritten solution.

The following net transaction accounts have been documented by a bank for the computation of its reserve requirements (in millions). Tuesday Wednesday Thursday 11th 12th 13th $ 500 $ 450 $ 480 Friday 14th $ 460 Monday Tuesday Wednesday Thursday Friday 21th $ 450 17th $ 480 18th $500 19th $ 470 20th $ 460 Net transaction accounts The average daily reserves at the Fed for the 14-day reserve maintenance period have been $43.5 million per day, and the average vault cash for the computation period has been estimated to be $1 million per day. EXAMPLE 13-2 Computation of Daily Average Required Reserves Consider ABC Bank's reserve manager, who wants to assess the bank's minimum cash reserve requirement target. The manager knows the bank's net transaction accounts bal- ance at the close of the banking day on each of the 14 days over the period Tuesday, June 30, to Monday, July 13. Consider the realized net transaction account positions of ABC Bank in Table 13-25. The minimum daily average reserves that a bank must maintain is computed as a percentage of the daily average net transaction accounts held by the bank over the two-week computation period, where Friday's balances are carried over for Saturday and Sunday. The minimum daily average for ABC Bank to hold against the daily average of $1,350.70 million in net transaction accounts is calculated as follows (amounts in millions): Daily average net transaction accounts x Reserve percentage = Daily average reserves required $15.2 $110.2-$15.2 $1,350.7-$110.2 0% 3 $ 0.000 2.850 124.050 10 Minimum average reserves to be held $126.900 a. What is the amount of the average daily required reserves to be held by the bank during the maintenance period? b. Is the bank in compliance with the requirements? Monday 24th $ 440
Transcribed Image Text:The following net transaction accounts have been documented by a bank for the computation of its reserve requirements (in millions). Tuesday Wednesday Thursday 11th 12th 13th $ 500 $ 450 $ 480 Friday 14th $ 460 Monday Tuesday Wednesday Thursday Friday 21th $ 450 17th $ 480 18th $500 19th $ 470 20th $ 460 Net transaction accounts The average daily reserves at the Fed for the 14-day reserve maintenance period have been $43.5 million per day, and the average vault cash for the computation period has been estimated to be $1 million per day. EXAMPLE 13-2 Computation of Daily Average Required Reserves Consider ABC Bank's reserve manager, who wants to assess the bank's minimum cash reserve requirement target. The manager knows the bank's net transaction accounts bal- ance at the close of the banking day on each of the 14 days over the period Tuesday, June 30, to Monday, July 13. Consider the realized net transaction account positions of ABC Bank in Table 13-25. The minimum daily average reserves that a bank must maintain is computed as a percentage of the daily average net transaction accounts held by the bank over the two-week computation period, where Friday's balances are carried over for Saturday and Sunday. The minimum daily average for ABC Bank to hold against the daily average of $1,350.70 million in net transaction accounts is calculated as follows (amounts in millions): Daily average net transaction accounts x Reserve percentage = Daily average reserves required $15.2 $110.2-$15.2 $1,350.7-$110.2 0% 3 $ 0.000 2.850 124.050 10 Minimum average reserves to be held $126.900 a. What is the amount of the average daily required reserves to be held by the bank during the maintenance period? b. Is the bank in compliance with the requirements? Monday 24th $ 440
Expert Solution
steps

Step by step

Solved in 3 steps with 1 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Central Bank
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS