You have following information on the Bank of Morrisland: it currently holds a total of $150 million in checking account deposits and a total of $15 million in reserves. It has borrowed $35 million from the Federal Reserve and other sources. It has generated loans worth of $150 million and it holds treasury securities worth of $25 million and mortgage backed securities worth of $25 million. The required reserve ratio is 10 percent. What will the balance sheet look like? What problem will it create if customers decide to withdraw $10 million in deposits? List the things the bank can take to rectify this problem.

You have following information on the Bank of Morrisland: it currently holds a total of $150 million in checking account deposits and a total of $15 million in reserves. It has borrowed $35 million from the Federal Reserve and other sources. It has generated loans worth of $150 million and it holds treasury securities worth of $25 million and mortgage backed securities worth of $25 million. The required reserve ratio is 10 percent. What will the balance sheet look like? What problem will it create if customers decide to withdraw $10 million in deposits? List the things the bank can take to rectify this problem.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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