9. Bank leverageUse the information given in North Central National Bank's balance sheet to answer the following questions.Bank's Balance SheetAssetsLiabilities and Owners' EquityReserves$175Deposits$1,400Loans$700Debt$225Securities$875Capital (owners' equity)$125Suppose the owners of the bank contribute an additional $200 from their own funds and use it to buy securities in the name ofincrease the securities account and increase the debt ▼ account.This would also bring the leverage ratio from its initial value of 14.00to a new value ofWhich of the following statements regarding the capital requirement is true? Check all that apply.Its intended goal is to protect the interests of the depositors.It specifies a minimum leverage ratio for all banks.Its intended goal is to protect the interests of those who hold equity in the bank.

Step 1: Initial Leverage Ratio = Assets/CapitalInitial Leverage Ratio = $1750/$125Initial Leverage…

Answered: 9. Bank leverage Use the information…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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37. Suppose that Second Republic Bank currently has $200,000 in demand deposits and $130,000 in outstanding loans. All remaining assets are in reserve. The Federal Reserve has set the reserve requirement at 10%. What is the value of this bank's reserve ratio (R)? (pick best answer) A) 15% B) 25% C) 35% D) 45% 2
11. Please answer the table only. The columns specifically.
5. The United States was among the first of the modern industrial nations to establish a central banking system
Table 14.1: FIRST COMMERCIAL BANK Asset Liabilities Total Reserves: $150,000 $100,000 $1,000,000 $200,000 Deposits Net Worth Required Reserves Excess Reserves ? ? Loans $1,200,000 Total $1,200,000 Total 13. Refer to Table 13. 1. First Commercial bank's excess reserves equal $ a) 150,000 b) 250,000 c) 100,000 d) 50,000
25. Assume: a required reserve ratio of 5%, this bank is the only one with excess reserves, banks do not wish to hold excess reserves and the public does not wish to increase its cash holdings. What is the maximum amount of new money the banking system can create? a) $700,000 b) $400,000 c) $4,000,000 d) $5,000,000 e) $11,000,000
7. The money creation process Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 10%. Hubert, a client of First Main Street Bank, deposits $500,000 into his checking account at First Main Street Bank. Complete the following table to reflect any changes in First Main Street Bank's T-account (before the bank makes any new loans). Assets Liabilities Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 10%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited Change in Excess Reserves Change in Required Reserves (Dollars) (Dollars) (Dollars) 500,000 Now, suppose First Main Street Bank loans out all of its new excess reserves to Eileen, who immediately uses the funds to write a check to Clancy. Clancy…
The table below shows information for United Bank. Deposits Reserves Reserve Requirement $300 million $33 million 10% 37 Which of the following statements is true concerning United Bank in the federal funds market? Multiple Choice United Bank will lend $3 million reserves in the federal funds market. United Bank will borrow $30 million reserves in the federal funds market. United Bank will lend $33 million reserves in the federal funds market. United Bank will borrow $3 million reserves in the federal funds market. # % &
23. Identify the four major methods the Fed uses to control the money supply. Give two examples of situations in which the Fed might use one of these methods and explain why that method is best for the given situation.
28. The assets of a commercial bank may include all of the following except: Question 28 options: a) reserve balances it holds at a Federal Reserve Bank. b) federal funds borrowed from another bank. c) loans a bank makes to its business customers.
Table 13.1: FIRST COMMERCIAL BANK Asset Liabilities Total Reserves: S150,000 s100,000 $1,000,000 $200,000 Deposits Net Worth Required Reserves Excess Reserves ? Loans $1,200,000 Total $1,200,000 Total 16. Refer to Table 13.1. First Commercial Bank's total loans equal $ a) 1,050,000 b) 1,200,000 c) 1,150,000 d) 1,250,000
ModernBank RealBank Assets Liabilities Assets Liabilities Base Money Payable on demand Base Money X Payable on demand 30 125 300 Loans Loans 175 220 a. Based on the information on the above Balance Sheets for ModernBank and RealBank, the value of X (base money) should be 300. True or False b. The amount of total (broad) money in ModernBank will increase more than 100 if ModernBank creates additional 100 as a new loan. True or False.
Suppose that there are a total of 9 other banks in the economy and that the balance sheet for the whole banking system is presented in the table below. Assume that each of the other banks also has a target reserve ratio of 10%. Assets (1 all) Liabilities/ Equity 50 V Reserves Loans Securities Fixed assets Total 3 E D $ 4 $1,200,000 6,800,000 2,500,000 3,500,000 $14,000,000 f. In the table above, show the balance sheet of this banking system when it is fully loaned up. Use columns (1 all). g. The increase in the money supply as a result of all the banks becoming fully loaned up is $[ R % 5 € 6 T $ G H 7 Demand deposits Shareholders' equity Total $14,000,000 F12 Scr Lk (1 all) $ PrtSc Pause Break 66 Insert

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