The table shows the balance sheets for the Bank of Canada and the Bank of Nova Scotia. Bank of Canada Assets The Bank of Canada buys S20 million of securities from the Bank of Nova Scotia. Liabilities (millions) (millions) Reserves of the Bank of Nova Scotia Securities Show how this transaction changes the balance sheets by filling in the numbers in the table. >>> If the change in balance is negative, include a minus sign. If the change in balance is positive, do not include a plus sign. Bank of Nova Scotia Assets (millions) Liabilities (millions) Securities Reserves

The table shows the balance sheets for the Bank of Canada and the Bank of Nova Scotia. Bank of Canada Assets The Bank of Canada buys S20 million of securities from the Bank of Nova Scotia. Liabilities (millions) (millions) Reserves of the Bank of Nova Scotia Securities Show how this transaction changes the balance sheets by filling in the numbers in the table. >>> If the change in balance is negative, include a minus sign. If the change in balance is positive, do not include a plus sign. Bank of Nova Scotia Assets (millions) Liabilities (millions) Securities Reserves

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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Question 1 Please use an example to explain the process that the banking system uses to create money. Assume in your example that Bank 1 receives $1,200 from Firm A and sets up a checking account (demand deposits) for Firm A. Three firms, i.e., Firm A, Firm B, and Firm C, will be included in the process. Also assume that Bank 1, Bank 2, and Bank 3 all hold 12% in reserves and lend out the remaining demand deposits to corporations to earn interests.
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
Balance sheet for a commercial bank FAB T-account Assets Liabilities Reserves $ ? Deposits $900 Loans $910 Debt $50 Capital (owner's equity) $50 The UAE central bank fixed the reserve ratio, R= 10% a- Calculate the reserve amount b- Define leverage and calculate the leverage ratio of the bank and interpret it
The checking account balance per bank statement is P3,874,000. Included in the bank statement are a bank service charge of P10,000, a note collection by the bank of P400,000 and the return of P100,000 from a matured time deposit. Outstanding checks totaled P490,000 while deposits in transit total P210,000. The depositor incorrectly recorded a cash collection of P82,000 as P28,000. What is the adjusted cash in bank? * A.P3,540,000 B.P3,594,000 C.P3,648,000 D.P4,154,000
The following table contains balance sheet information for Dual bank. All assets and liabilities are currently priced at par. Assets Commercial bills T-notes T-bonds Loans Amount (Smillion) Duration 900 400 (?) 700 Liabilities 0.5 Deposits 0.9 Federal Funds 2 0.7 Amount (Smillion) Duration 500 500 2 If the financial institution has instead invested $400 million on the T- bonds, what would be the impact on the firms' market value of equity if the entire yield curve shifts upward by 30 basis points [i.e., DR/(1+R) = 0.0030]?
How can I calculate using a financial indicator, which of the companies has the greatest possibility of obtaining more money borrowed from a bank?
what is the maximum amount of loans that the Second National Bank can make if it holds only the required reserves?
Blakely Industries has the following items: Currency $26,250 Customer checks that have not been deposited 700 U.S. government bonds that originally maturing in 3 months 13,000 U.S. government bonds that originally maturing in 12 months 14,000 Cash in saving and checking accounts 64,000 Certificates of deposits that originally maturing in 18 months 47,000 Required: How much should Blakely report as cash and equivalents on its balance sheet?
The Not-Indicted-Yet Bank has the following assets: Cash of $3500 U.S. Bonds worth $20000 Outstanding Loans of $90000 Deposits at the Fed of $7500 Miscellaneous of $5000 The bank also has the following liabilities: Customer Deposits of $100000 Net Equity $26000 The required reserve ratio is 0.1. 1. What are the actual reserves of the bank? Note: do not use a comma or dollar sign in your answer, and round to the nearest dollar. 2. What are the required reserves of the bank? Note: do not use a comma or dollar sign in your answer, and round to the nearest dollar. 3. What are the excess reserves of the bank? Note: do not use a comma or dollar sign in your answer, and round to the nearest dollar. 4. What is the maximum single loan that this individual bank can make? Note: do not use a comma or dollar sign in your answer, and round to the nearest dollar. 5. What is the total amount of loans that all banks taken together could generate starting with the reserve situation of this bank? Note:…
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.
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Assume that banks holds no excess reserves and the public holds no currency: A. If a bank receives a deposit inflow of $100,000 explain (using t-accounts) what happens to this bank and one additional round in the deposit creation process assuming the reserve requirement is 8%. B. How much do deposits and loans change for the banking system when the process is completed? Show computation and the entire banking system's final T-account. C. Suppose the Central Bank sells $5 billion to ABC Bank. Determine what happens to checkable deposits of the entire banking system after the sale and completion of the multiple deposit creation process. Determine the change in checkable deposit in the banking system and show the T-account of the banking system.