The factors that the committee must consider while setting the CEO’s compensation. Whether the compensation must be of dollar or stock or both. The way to measure the performance. The actions of Person X if he is the vice president of some other company. Introduction: Compensation Package: The compensation package of the manager should be attractive which inspire them to perform actively. If the compensation package is good, the manager will focus on the maximization of stockholders value. The compensation package should be fair.

Question

National Bank currently has $500 million in transaction deposits on its balance sheet. The current reserve requirement is 10 percent, but the Federal Reserve is decreasing this requirement to 8 percent. Show the balance sheet of the Federal Reserve and National Bank if National Bank converts all excess reserves to loans, but borrowers return only 50 percent of these funds to National Bank as transaction deposits. Show the balance sheet of the Federal Reserve and National Bank if National Bank converts 75 percent of its excess reserves to loans and borrowers return 60 percent of these funds to National Bank as transaction deposits.

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Question

Chapter 1, Problem 12Q

Summary Introduction

To determine: The factors that the committee must consider while setting the CEO’s compensation. Whether the compensation must be of dollar or stock or both. The way to measure the performance. The actions of Person X if he is the vice president of some other company.

Introduction:

Compensation Package: The compensation package of the manager should be attractive which inspire them to perform actively. If the compensation package is good, the manager will focus on the maximization of stockholders value. The compensation package should be fair.

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National Bank currently has $500 million in transaction deposits on its balance sheet. The current reserve requirement is 10 percent, but the Federal Reserve is decreasing this requirement to 8 percent. Show the balance sheet of the Federal Reserve and National Bank if National Bank converts all excess reserves to loans, but borrowers return only 50 percent of these funds to National Bank as transaction deposits. Show the balance sheet of the Federal Reserve and National Bank if National Bank converts 75 percent of its excess reserves to loans and borrowers return 60 percent of these funds to National Bank as transaction deposits.

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