The required reserve ratio in this economy is%. (Enter your response as an integer.)If the total money stock (supply) is $200,000, the total amount of reserves held in the banking system is $ . (Enter your response as an integer.)The Sylvania Central Bank decides that it wants to cut the money stock in half. It is considering an open market operation.With commercial banks holding 10 percent of their checking deposits as excess reserves and the required reserve ratio equal to the value computed above, the Central Bank shouldV bonds worth $. (Enter your responseas an integer.) Challenge Problem. Assume that the public in the small country of Sylvania does not hold any cash. Commercial banks, however, hold 10 percent of their checking deposits as excess reserves, regardless of the interest rate. Inthe questions that follow, the "money multiplier" is given by 1/ (RR+ ER),whereRR = the percentage of deposits that banks are required to keep as reservesER = the percentage of deposits that banks voluntarily hold as excess reservesConsider the balance sheet of one of several identical banksAssetsLiabilities and Net WorthReserves600Checking Deposits2,400Loans1,800Net WorthTotal Assets2,400Liabilities and Net Worth2,400

Calucalting Excess reserves Money Multiplier (MM) & Monetary Base(MB) A.Excess reserves=2800 ×0.04 = 112 Required Reserves = Total Reserves - Excess Reserves = 700 - 112 = 588 Required Reserve ratio =Required ReservesCheckable deposits=5882800=0.21 = 21% B. Money Multiplier (MM) = 1(ER + MR) = 1(0.04 +0.21) = 10.25=4 Monetary base(MB) = Money stockMM = 6000004=150000 Monetary Base = Currency + Reserves, and Currency (held by Public) = 0 Reserves = Monetary Base = 150000 C. To double the money stock,money supply has to increase by 600000 Central bank should buy bonds worth 150000[i.e Increase in money stockMM = 6000004=150000

Business

Finance

The required reserve ratio in this economy is %. (Enter your response as an integer.) If the total money stock (supply) is $200,000, the total amount of reserves held in the banking system is S (Enter your response as an integer.) The Sylvania Central Bank decides that it wants to cut the money stock in half. It is considering an open market operation. With commercial banks holding 10 percent of their checking deposits as excess reserves and the required reserve ratio equal to the value computed above, the Central Bank should as an integer.) V bonds worth $. (Enter your response

The required reserve ratio in this economy is %. (Enter your response as an integer.) If the total money stock (supply) is $200,000, the total amount of reserves held in the banking system is S (Enter your response as an integer.) The Sylvania Central Bank decides that it wants to cut the money stock in half. It is considering an open market operation. With commercial banks holding 10 percent of their checking deposits as excess reserves and the required reserve ratio equal to the value computed above, the Central Bank should as an integer.) V bonds worth $. (Enter your response

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

I need both a ) and b)answers i will give upvotes no chatgpt
Step by step solutions please
Provide help with this Question
None
Assume that banks lend out all their excess reserves. Currently, the total reserves that banks hold equal $32.8 billion. If the Federal Reserve decreases its reserve requirement from 8.2 percent to 6 percent, then there is potential for the whole banking system to raise the money supply by: O $8.8 billion O $10 billion. $246 billion. O $146,7 billion O $256 billion.
PJ Morgan Bank has bank capital equal to 10% of total assets. Most of its deposits are short-term and adjustable rate. PJ Morgan's assets are long maturity and fixed rate. What is true of the bank? |- Bank capital will fall below 10% of total assets if interest rates increase. II - Bank profits will increase if interest rates drop. III - The bank will have to borrow from the Fed if interest rates increase. IV - The bank has a positive gap. O ,Il and IV O , II, II and IV O l and Il only O , II, and IV
3) Suppose there is a 10% reserve requirement, and the bank has the following Balance Sheet Assets Reserves Loans Securities Liabilities 55M Deposits 250M Bank Capital 45M 350M 50M Now, let's suppose there is a deposit outflow of $60 million. If the bank only finances its reserve shortages by borrowing from the Federal Reserve, show the bank's balance sheet after the deposit outflow and receiving the loan from the Fed.
Suppose that Big Bucks Bank has the simplified balance sheet shown below. The reserve ratlo Is 20 percent. Assets (1) (2) Liabilities and net worth (1) (2') Reserves 26,000 Checkable deposits $ 100,000 Securities 38,000 Loans 36,000 Instructions: Enter your answers as a whole number. a. What is the maximum amount of new loans that Big Bucks Bank can make? Using the table above, show In columns 1 and 1' how the bank's balance sheet wll appear after the bank has lent this additional amount by Inserting the new values Into the gray shaded cells of the glven table. b. By how much has the money supply changed? C. How will the bank's balance sheet appear after checks drawn for the entire amount of the new loans have been cleared agalnst the bank? Show the new balance sheet in columns 2 and 2' by Inserting the new values Into the gray shaded cells of the given table. d. Using the original figures, revisit questions a, b, and cbased on the assumption that the reserve ratio is now 15 percent.…
8
6. Marly Bank currently has $650 million in transaction deposits on its balance sheet. The current reserve requirement is 10 percent, but the Federal Reserve is decreasing this requirement to 9 percent. a. Show the balance sheet of the Federal Reserve and Marly Bank if Marly Bank converts all excess reserves to loans, but borrowers return only 60 percent of these funds to National Bank as transaction deposits. b. Show the balance sheet of the Federal Reserve and Marly Bank if Marly Bank converts 90 percent of its excess reserves to loans and borrowers return 75 percent of these funds to Marly Bank as transaction deposits.
“… When the assets of the Central Bank are analyzed, one should see that there is no significant increase. This is a net indicator of the Central Bank’s tight monetary policy. In an economy where Central Bank’s balance-sheet expands almost 2%, saying that money supply increases almost 16% is just bending the truth …”is this idea true? Why or why not? Explain your answer in detail.
Consider two local banks Bank A has 100 loans outstanding, each for $1.0 million, that it expects will be repaid today. Each loan has a 5% probability of default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of $100 million outstanding, which it also expects will be repaid today It also has a 5% probability of not being repaid Calculate the following a. The expected overall payoff of each bank b. The standard deviation of the overall payoff of each bank a. The expected overall payoff of each bank The expected overall payoff of Bank A is $95 million (Round to the nearest integer) The expected overall payoff of Bank B is $95 million (Round to the nearest integer) b. The standard deviation of the overall payoff of each bank. The standard deviation of the overall payoff of Bank A is [217% (Round to two decimal places) The standard deviation of the overall payoff of Bank B is 21.79% (Round to two decimal…

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS