Which of the following statements is true? Question 30 options: a) A bank’s balance sheet shows that total assets equal total liabilities plus equity capital. b) A bank’s balance sheet indicates whether or not the bank is profitable. c) A bank’s liabilities are its uses of funds. d) A bank’s assets are its sources of funds.

Which of the following statements is true? Question 30 options: a) A bank’s balance sheet shows that total assets equal total liabilities plus equity capital. b) A bank’s balance sheet indicates whether or not the bank is profitable. c) A bank’s liabilities are its uses of funds. d) A bank’s assets are its sources of funds.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter27: Money And Banking

Section: Chapter Questions

Problem 30P: A bank has deposits of 400. It holds reserves of 50. It has purchased government bonds worth 70. It...

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29. For a given return on assets, holding other factors constant, Question 29 options: a) a lower capital-to-asset ratio has no effect on the return on equity of the bank. b) the lower is bank capital relative to assets, the higher is the return on equity of the bank. c) the lower is bank capital relative to assets, the lower is the credit risk for the owners of the bank. d) the lower is bank capital relative to assets, the lower is the return on equity of the bank.
1. In answering the question, you should emphasize the line of reasoning that generated your results; it is not enough to list the results of your analysis. Include correctly labeled diagrams, if useful or required, in explaining your answer. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. The Bank of Uchenna has the following balance sheet. Assets Liabilities and Equity Reserves $30,000 Demand deposits $100,000 Loans $70,000 Property $2,000 Equity (net worth) $2,000 Assume that the reserve requirement ratio is 20 percent. a. Calculate the dollar value of the reserves that the Bank of Uchenna is required to hold. b. Given the current reserves, calculate the maximum value of additional loans that the Bank of Uchenna can make. c. Assume that Elike raises $5,000 in cash from a yard sale and deposits the cash in his checking account at the Bank of Uchenna. By how much does the money supply immediately change as a result of…
24. A bank is insolvent when Question 24 options: a) its liabilities exceed its assets. b) its capital exceeds its liabilities. c) its assets exceed its liabilities. d) its assets increase in value.
Assets 1. A share in a publicly traded company 2. A $5 bill 3. The funds in a money market account 4. Your house Select the assets in order of their liquidity, from most liquid to least liquid.
15. If a bank’s return on assets (ROA) is 1%, and its asset-to-equity ratio (equity multiplier) is 10, then the bank’s return on equity (ROE) is Question 15 options: a) 100%. b) 5%. c) 1%. d) 10%.
31) The FDIC must take steps to close down banks whose equity capital is less than ________ of assets. A) 4% B) 3% C) 2% D) 1% 32) Off-balance-sheet activities A) generate fee income with no increase in risk. B) increase bank risk but do not increase income. C) generate fee income but increase a bank's risk. D) generate fee income and reduce risk. 33) The Basel Accord, an international agreement, requires banks to hold capital based on A) risk-weighted assets. B) the total value of assets. C) liabilities. D) deposits. 34) The Basel Accord requires banks to hold as capital an amount that is at least ________ of their risk-weighted assets. A) 10% B) 8% C) 5% D) 3% 35) Under the Basel Accord, assets and off-balance sheet activities were sorted according to ________ categories with each category assigned a different weight to reflect the amount of ________. A) 2; adverse selection B) 2; credit risk C) 4; adverse selection D)…
17 When a $10 check written on an account at Chase is deposited into an account at Citibank, then Question 17 options: a) the liabilities of Citibank increase by $10. b) the liabilities of Chase increase by $10. c) the reserves of the Chase increase by $ 10. d) the assets of Citibank fall by $10.
7. The bank's balance sheet The following table shows the balance sheet for Blue Harbor Bank. Compute the value of the bank's capital and enter it in the balance sheet. Then answer the question that follows. Balance sheet of Blue Harbor Bank as of January 4, 2021 Assets Reserves Securities $1,200,000 Loans $275,000 Total $4,300,000 $5,775,000 Checkable deposits Liabilities Bank's capital (net worth) Total $ $5,675,000 $5,775,000 Suppose that Caroline, a borrower of Blue Harbor Bank, defaults on a $300,000 loan, and the collateral offered to get the loan is worthless. This will the loans outstanding portion of the bank's balance sheet, and it will the bank's capital to $ . In this situation, the bank is
11. Macroland has a very simple banking system, in which there is only one chartered bank (The First Bank). The government of Macroland imposes a minimum required reserve ratio of 3%. Individuals in Macroland hold a fixed amount of $1200 in the form cash to facilitate their daily transactions and will deposit any excess amount of money into their bank accounts. The initial balance sheet of the First Bank is as follows: Assets Liabilities & Equity Reserves $255 Chequable deposits $7500 Loans $7400 Shareholder equity $155 Note: Unless otherwise stated, the First Bank will hold the excess reserves fixed at the current level as shown in the initial balance sheet and will lend out any surplus of reserves beyond this. a. Find the required reserves and the excess reserves held by the First Bank. b. Suppose there is a change in money demand such that people increase their cash holdings by $45 by withdrawing cash from their bank accounts. By how much will the money supply change? c. Return to…
Question 35 If a bank has a required reserve ratio of 25% and there are $5,300,000 in deposits, what is amount of required reserves? $25,000 $280,000 $1,325,000 $2,275,000 $5,005,000
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39. Consider a fractional-reserve banking system in which an initial deposit of $1,000 can generate up to $4,000 in money. What is the reserve ratio? (A) 4 percent. (B) 5 percent. (C) 25 percent. (D) 75 percent.