Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 29, Problem 5PA
Sub part (a):
To determine
The balance sheet and leverage ratio of the bank.
Sub part (b):
To determine
The balance sheet and leverage ratio of the bank.
Sub part (c):
To determine
The balance sheet and leverage ratio of the bank.
Subpart (d):
To determine
The balance sheet and leverage ratio of the bank.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Help
What's the answer for letter C and D
2. Happy Bank starts with $200 in bank capital. It then takes in $800 in deposits. It keeps 12.5% (1/8th) of deposits in reserve. It uses the rest of its assets to make bank loans.
A.) Show the balance sheet of Happy Bank.B.) What is Happy Bank’s leverage ratio?C.) Suppose that 10% of the borrowers from Happy Bank default and these bank loans become worthless. Show the bank’s new balance sheet.
Please only answer part D
D.) By what percentage do the bank’s total assets decline? By what percentage does the bank’s capital decline? Which change is larger? Why?
Chapter 29 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
Ch. 29.1 - Prob. 1QQCh. 29.2 - Prob. 2QQCh. 29.4 - Prob. 4QQCh. 29 - Prob. 1QRCh. 29 - Prob. 2QRCh. 29 - Prob. 3QRCh. 29 - Prob. 4QRCh. 29 - Prob. 5QRCh. 29 - Prob. 6QRCh. 29 - Prob. 7QR
Ch. 29 - Prob. 8QRCh. 29 - Prob. 9QRCh. 29 - Prob. 10QRCh. 29 - Prob. 1QCMCCh. 29 - Prob. 2QCMCCh. 29 - Prob. 3QCMCCh. 29 - Prob. 4QCMCCh. 29 - Prob. 5QCMCCh. 29 - Prob. 6QCMCCh. 29 - Prob. 1PACh. 29 - Prob. 2PACh. 29 - Prob. 3PACh. 29 - Prob. 4PACh. 29 - Prob. 5PACh. 29 - Prob. 6PACh. 29 - Prob. 7PACh. 29 - Prob. 8PACh. 29 - Prob. 9PACh. 29 - Prob. 10PACh. 29 - Prob. 11PA
Knowledge Booster
Similar questions
- Why do we call a bank a financial intermediary?arrow_forwardThe table below, shows the balance sheet of the Bruins Bank. Assets Reserves Loans Securities Fixed assets Total $30 240 90 40 400 Liabilities/Equity Demand Deposits Shareholders' equity Total $360 40 400 By how much is the Bruins Bank over- or under-reserved if the target reserve ratio is as listed below. a. If the target reserve ratio is 2.5% the Bruins Bank is over-reserved b. If the target reserve ratio is 5.0% the Bruins Bank is over-reserved c. If the target reserve ratio is 7.5% the Bruins Bank is over-reserved d. If the target reserve ratio is 12.5% the Bruins Bank is under-reserved v by $ by $ by $ by $arrow_forward11arrow_forward
- Explain how a bank could optimise its position through managing its use of different financial products.arrow_forwardUse the information presented in Midwestern Mutual Bank's balance sheet to answer the following questions. Bank's Balance Sheet Assets Liabilities and Owners' Equity Reserves $150 Deposits $1,200 Loans $600 Debt $200 Securities $750 Capital (owners' equity) $100 Suppose the owners of the bank borrow $100 to supplement their existing reserves. This would increase the reserves account and the асcount. This would also bring the leverage ratio from its initial value of to a new value of Which of the following do bankers take into account when determining how to allocate their assets? Check all that apply. The size of the monetary base The total value of liabilities The return on each assetarrow_forwardThe table below is the balance sheet for the Oilers Bank, which has a target reserve ratio of 5%. Liabilities/Equity Demand Deposits Shareholders' equity Assets Reserves Loans Securities Fixed assets Total $3,000 34,000 8,500 4,500 50,000 Total $40,000 10,000 50,000 a. The Oilers Bank is over-reserved by $ b. The bank makes a loan equal to the excess reserves and the borrower writes a cheque (for the full amount of the loan) to another customer of the bank, who then deposits it. The new amount of excess reserves is $ c. Instead, the cheque written by the borrower is cleared against the Oilers Bank (the cheque was written to a customer of another bank). The amount of excess reserves held by the Oilers Bank is $arrow_forward
- Respond to the question with a concise and accurate answer, along with a clear explanation and step-by-step solution, or risk receiving a downvote.arrow_forwardThe table below is the balance sheet for all banks combined in the banking system. All banks have a target reserve ratio of 5%. Assets Reserves Loans $160,000 $ 2,533,250 Liabilities/Equity Demand Deposits $3,037,500 $ Shareholders' equity 337,500 Securities Fixed assets Total 337,500 344,250 3,375,000 Total 3,375,000 a. The amount of excess reserves is $ b. The maximum amount that loans and deposits could be increased by is $ c. Assume that the system becomes fully loaned up. Show the new balance sheet in the table above. d. Now that the system is fully loaned up, the money supply will have Increased by $arrow_forward22. Which of the following entries would appear on the liabilities side of a commercial bank's balance sheet? Government of Canada securities demand deposits cash reserves mortgage loans foreign currency reservesarrow_forward
- A bank has a reserve ratio of 10 percent, and it has received $5,000 of deposits. What is the bank's assets? Group of answer choices It has $500 in reserves and $4,500 in loans. It has $50 in reserves and $4,950 in loans. It has $50 in reserves and $5,000 in loans. It has $10 in reserves and $4,990 in loans.arrow_forwardAssets Liabilities and Equity Reserves $5,000 Demand deposits $20,000 Business loans $10,000 Student loans $8,000 Government securities $2,000 Equity (Net worth) $5,000 Total assets $25,000 Total liabilities and equity $25,000 The following is a balance sheet for Smith Bank. Assume a 10% reserve requirement. A. Calculate a 10% reserve requirement B. Calculate the maximum amount of additional loans that Smith Bank can make without selling its holdings of government securities. C. Assuming that Smith Bank and other banks now lend out all excess reserves, calculate the maximum possible change in the following: i. Demand deposits throughout the banking system ii. Total reserves throughout the banking system D. Suppose that the country's central bank purchases $1,000 of Smith Bank's holdings of government securities as part of its open market operations. Do…arrow_forwardneed E,F,Garrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Macroeconomics (MindTap Course List)EconomicsISBN:9781285165912Author:N. Gregory MankiwPublisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou...EconomicsISBN:9781285165875Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Macroeconomics (MindTap Course List)EconomicsISBN:9781305971509Author:N. Gregory MankiwPublisher:Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:9781285165912
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...
Economics
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou...
Economics
ISBN:9781285165875
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:9781305971509
Author:N. Gregory Mankiw
Publisher:Cengage Learning