The table shows the commercial banks' balance sheet (aggregated over all the banks). The commercial banks' desired reserve ratio on all deposits is 5 percent and there is no currency drain. What is the quantity of loans and the quantity of total deposits when the banks have no excess reserves? >>> Answer to 2 decimal places. The total quantity of loans after the banks have lent all their excess reserves is $million. Assets Liabilities (millions of dollars) Reserves at the Fed 20 Checkable deposits 90 Cash in vault 10 Savings deposits 90 Securities 50 Loans 100

The table shows the commercial banks' balance sheet (aggregated over all the banks). The commercial banks' desired reserve ratio on all deposits is 5 percent and there is no currency drain. What is the quantity of loans and the quantity of total deposits when the banks have no excess reserves? >>> Answer to 2 decimal places. The total quantity of loans after the banks have lent all their excess reserves is $million. Assets Liabilities (millions of dollars) Reserves at the Fed 20 Checkable deposits 90 Cash in vault 10 Savings deposits 90 Securities 50 Loans 100

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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Imagine that the banking system's balance sheet can be represented by the following t-account: Assets LIABILITIES AND NET WORTH RESERVES 200 DEPOSITS 2000 BONDS 800 LOANS 1000 NETWORTH 0 TOTAL 2000 TOTAL 2000 Assuming the bank is "loaned up" the required reserve ratio is ___________ (round to two decimal places) The money multiplier is ___________ Imagine that the central bank uses open market operations to buy $300 worth of bonds from the bank above. Fill in the following t-account assuming that the money multiplier has taken its full effect: ASSETS LIABILITIES AND NET WORTH RESERVES __?___ DEPOSITS ___?__ BONDS ____?___ LOANS ____?____ NET WORTH ___?___ TOTAL _____?______ TOTAL ___?___
Assume that Bank M is the only commercial bank in the country with zero excess reserve and its legal cash requirement is 12%. Suppose that a customer, Mr. S, deposits RM5000 in the Bank M. a) Construct a balance sheet for Bank M b) Calculate the total deposits. c) Calculate the total reserves d) Calculate the total loans created
The table shows the balance sheet of a banking system (aggregated over all banks) The desired reserve ratio on all deposits is 5 percent. There is no currency drain Assets Liabilities (millions of dollars) What is the quantity of loans and the quantity of total deposits when the banks have no excess reserves? Reserves at the Fed Cash in vault 25 Checkable deposits Savings deposits 100 20 100 >>> Answer to 2 decimal places Securities 65 Loans 90 The total quantity of loans after the banks have lent all their excess reserves is SOmilion. The total quantity of deposits after the banks have lent all their excess reserves is Smillion
Bank A just received total deposit equal to $30,700,000.00. Required reserve ratio for the banking system is set at 2.1%, (or 0.021). a. How much of the total deposit can bank A lend out? In other words, what is bank A's excess reserve? $ b. By how much will total money supply change if bank A, and all subsequent banks, are able to lend out their entire excess reserves as the result of the initial $30,700,000.00 deposit in bank A? $
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.
Suppose that a bank does the following: a. Sets a loan rate on a prospective loan with BR = 4.23% and ϕ = 3.16%. b. Charges a 0.33 percent loan origination fee to the borrower. c. Imposes a 9 percent compensating balance requirement to be held as noninterest-bearing demand deposits. d. Holds reserve requirements of 8 percent imposed by the Federal Reserve on the bank’s demand deposits. Calculate the bank’s ROA on this loan.
3. Suppose you dopiest SR 5000 in currency into your checking account at a branch of Al-Rajhi Bank, which we will assume that the required reserve ration is %10. a. Use a T-account to show the initial effect of this transaction on Al-Rajhi's balance sheet. b. Suppose that Al-Rajhi Bank makes the maximum loan it can from the fund you deposited. Use a T-account to show the the initial effect of this transaction on Al- Rajhi's balance sheet. Also include in this T-account the transaction from part (a). c. Now suppose that whoever took out the loan in part (b) writes a check for this amount and that person receiving the check deposit in Alinma Bank. Use a T-account to show the the initial effect of this transaction on Alinma's balance sheet.
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]?
1. A company usually has an average balance in its bank account equal to $60,000. TheThe company makes a loan for $80,000 to pay it off over the long term. The interest rate on the loan is7%. The bank requires the company that, while the loan is in force, the company must havean average balance in your bank account of not less than $80,000. The requirement of this balancecompensation will result in the effective interest rate that the company will pay will be:a. 7%b. Less than 7%c. Greater than 7%d. cannot be determined
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.
Q2) Suppose $150 of currency is in circulation. What is the banks’ impact on money supply?Calculate the money supply in case of Fractional reserve banking system. Pretend the Reserve Ratio is by 2.5%. 1. Borrowers first withdrew the loan from 1st National Bank and deposited it in 2nd National Bank. 2. Borrowers Took The Loan from 2nd National Bank and Deposited it in 3rd National Bank 3. Then Borrowers withdrew finally the loan from 3rd National Bank and deposited it in 4th National Bank. Questions: A. Open a T Account for each Bank with the previous situations. B. Show the Impact on money supply (How much the $150 of reserves had generated?)
Two types of borrowers, type A and B, are requesting a loan in the amount of $44,000. Type A repays with prob. 1, while type B repays with prob. 0.76. If a bank cannot observe type, but believes that fraction 0.8 of the borrower pool is type A, then what is the competitive pooling rate the bank can offer these borrowers? 8.7% 7.7% 6.5% 5.0%