Commercial company, Wistoria, is applying for a loan from the First Bank of Denmark, which currently has this balance sheet: Assets $4,000,000 Reserves $8,000,000 Loans Liabilities $12,000,000 Demand Deposits a. If the bank of Denmark wants to hold onto reserves equal to 0.25 of its demand deposits, what loan value can the bank of Denmark make? b. If the bank of Denmark makes a loan, and Wistoria decides to take the loan in cash, show the new balance sheet. c. How would withdrawal affect the (M1) money supply?

Commercial company, Wistoria, is applying for a loan from the First Bank of Denmark, which currently has this balance sheet: Assets $4,000,000 Reserves $8,000,000 Loans Liabilities $12,000,000 Demand Deposits a. If the bank of Denmark wants to hold onto reserves equal to 0.25 of its demand deposits, what loan value can the bank of Denmark make? b. If the bank of Denmark makes a loan, and Wistoria decides to take the loan in cash, show the new balance sheet. c. How would withdrawal affect the (M1) money supply?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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