5 Suppose that Karen deposits $400 into her checking account at the bank. The reserve requirement for Karen's bank is 9%. Assumethe bank does not want to hold any excess reserves of new deposits.a. Use this information to complete the balance sheet below to show how the bank's assets and liabilities change when Karen depositsthe $400Instructions: Enter your answers as a whole numberA Simple Bank Balance SheetAssetsChange in Reserves: 3Change in Loans) 1LiabilitiesChange in Deposits:b. Why are deposits considered liabilities for a bank?O The bank must hold deposits as reserves at the Federal Reserve,O Deposits can be withdrawn at any timeO Deposits can be loaned out by the bankO The bank must pay interest on deposits

In this scenario, we'll explore the impact of a deposit on a bank's balance sheet following Karen's…

Answered: Suppose that Karen deposits $400 into…

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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Assume that a bank receives a deposit of $1,000 in cash, puts aside $200 as required reserves, and makes a loan of $800, these transactions imply that: the money multiplier is 10. the money multiplier is 5. the money multiplier is 4. the money multiplier is 2. the money multiplier is 2.
You have a checking account and a savings account at a credit union. Your checking account has a constant balance of $500. The table shows the total balance of the accounts over time. Total Year, t balance $2500 1 $2540 2 $2580.80 $2622.42 4 $2664.86 $2708.16 a. Write a function m that represents the balance of your savings account after t years. m(t) b. Write a function B that represents the total balance of the two accounts after t years. B(t) =
Use the information presented in Southwestern Mutual Bank's balance sheet to answer the following questions. Bank's Balance Sheet Assets Liabilities and Owners' Equity Reserves $200 Deposits $1,600 Loans $800 Debt $250 Securities $1,000 Capital (owners' equity) $150 Suppose a new customer adds $100 to his account at Southwestern Mutual Bank, which the owners of the bank then use to make $100 worth of new loans. This would increase the loans account and increase the debt account. This would also bring the leverage ratio from its initial value of to a new value of Which of the following is true of the capital requirement? Check all that apply. Its intended goal is to protect the interests of the depositors. Its intended goal is to protect the interests of those who hold equity in the bank. It specifies a minimum leverage ratio for all banks.
1. Jackie received $10 000 and deposits it in CIBC. The Current RRR is 12.5%. What is the expected change in deposits? 2. You place $9 700 into the bank which was able to create credit worth $106 700. What is the credit creation multiplier? 3. You are given the following information: Initial Deposit $2 750 Change in deposits $11 000 Calculate the RRR. 4. A customer deposits money into a bank which was able to create $10 000 000 in credit from it. The RRR is 10%. What was the value of the initial deposit?
Suppose you deposit $100 in a bank, which of the following will occur A The bank's assets will increase by $100 B The bank's liabilities will increase by $200 C The bank's liabilities will decrease by $100 D The bank's reserves will increase by $200
a) Bank A has the following balance sheet (in millions): Assets Cash Securities Loans Total assets $70 The bank is expecting a $12 million net deposit drain. Liabilities and equity Deposits Equity Total liabilities and equity $5 10 55 $62 9 $70 ii) Show the new balance sheet if the bank uses stored liquidity management to offset the expected drain. Also, explain the effect on the size and composition of assets and liabilities.
2. On your mother's birthday, you bought her a new iPhone from Best Buy. Assume that you made- your purchase by writing a check for $900, and the store promptly deposited your check in its bank. i. Using T-accounts, show the effect of this transaction on your bank and on the Best Buy's hank (after your check is processed and cleared by the Federal Reserve). ii. What happens to your bank's reserves? What happens to the reserves of Best Buy's bank? iii. Assuming the reserve requirement is 10 percent and your bank was holding no excess reserves initially, what is the level of excess reserves in your bank after the transaction? iv.List two possible methods your bank can employ to remedy its reserve deficiency.
A bank developed a model for predicting the average checking and savings account balance as balance = -18,339 +348 x age + 1,230 x years education + 0.114 x household wealth. a. Explain how to interpret the numbers in this model. b. Suppose that a customer is 26 years old, is a college graduate (so that years education = 16), and has a household wealth of $190,000. What is the predicted bank balance? a. The number -18,339 The number 348 The number 1,230 The number 0.114
2) Calgary Finance Bank has the following balance sheet: Assets Liabilities $100 $1000 Chequable Deposits Capital $1000 $100 Reserves Loans Assume there is no excess reserve. One day Jack luckily finds a bill of $20 underneath his mattress and he deposits it into this bank. a) Describe how this deposit may affect Calgary Finance Bank's balance sheet. b) What will be the excess reserve now? c) To keep reserve ratio at target level, what would this bank do? How would the action affect its balance sheet? d) If all commercial banks have the same target reserve ratio as this bank, and there is no cash drain, what will be the change in total deposits for the whole banking system after the process of money creation is completed?
. Alec Tomita's savings account statement is shown below What is his new balance? Previous Balance S568.23 Interest Deposits Withdrawals $2.37 $562.32 S874.36 14. Rosa Izquierdo has checks for $50.00 and $35.00. She also has 2 twenty-dollar bills. She would like to receive $25.00 in cash and deposit the rest in her saving account. What is the total deposiť?? 15. Angel Garcia deposited his $750 federal income tax refund check into his savings account. The account pays 5% and he made no other deposits or withdrawals. How much is in the account after 3 months? 16. George Faust deposited $3,000 in a savings account that earns 4% compounded quarterly. He made nc other deposits or withdrawals. What is the amount in the account at the end of the second quarter?
Assume the Bank of Smallville opens its doors to depositors and receives $100,000 in cash deposits. a) Prepare a balance sheet for Bank of Smallville based on the above information. b) Assume furthermore that the bank has to abide by a 20% reserve ratio. How much in excess reserves does the bank hold? Could this bank make a loan in the amount of $90,000? Briefly explain. c) Based on the amount of excess reserves, if the bank makes the loans, show the immediate impact on the Bank of Smallville's balance sheet. d) Calculate value of the money multiplier? e) How much money would be created in the banking system if other banks also lend as much as possible? Part B a) What is meant by the term "excess supply of money?" How does the money market resolve this disequilibrium? b) Explain with diagrams, what happens to the money supply, interest rates, investment spending and GDP when the central bank makes open market purchases.
Show how each of the following would initially affect a bank’s assets liabilities. Someone makes $1000 deposit into a checking account. A bank makes a loan of $1000 by establishing a checking account for $1000 The loan described in part (B) is spent. A bank must write off a loan because the borrower defaults.

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