FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Problem 4-5 (LG 4-3)
National Bank currently has $1,050 million in transaction deposits on its balance sheet. The current reserve requirement is 12 percent,
but the Federal Reserve is decreasing this requirement to 10 percent.
a. Show the balance sheet of the Federal Reserve and National Bank if National Bank converts all excess reserves to loans, but
borrowers return only 50 percent of these funds to National Bank as transaction deposits.
b. Show the balance sheet of the Federal Reserve and National Bank if National Bank converts 90 percent of its excess reserves to
loans and borrowers return 60 percent of these funds to National Bank as transaction deposits.
Complete this question by entering your answers in the tabs below.
Required A Required B
Show the balance sheet of the Federal Reserve and National Bank if National Bank converts all excess reserves to loans, but borrowers return
only 50 percent of these funds to National Bank as transaction deposits. (Enter your answers in millions. Do not round intermediate calculations.
Round your "Panel B" answers to 3 decimal places. (e.g., 32.161))
Panel A: Initial Balance Sheets
Assets
Assets
Panel B: Balance Sheet after All Changes
Assets
Assets
Federal Reserve Bank
million
million
million
Federal Reserve Bank
million
National Bank
million
million
National Bank
< Required A
Liabilities
Liabilities
Liabilities
Liabilities
Required B >
million
million
million
million
expand button
Transcribed Image Text:Problem 4-5 (LG 4-3) National Bank currently has $1,050 million in transaction deposits on its balance sheet. The current reserve requirement is 12 percent, but the Federal Reserve is decreasing this requirement to 10 percent. a. Show the balance sheet of the Federal Reserve and National Bank if National Bank converts all excess reserves to loans, but borrowers return only 50 percent of these funds to National Bank as transaction deposits. b. Show the balance sheet of the Federal Reserve and National Bank if National Bank converts 90 percent of its excess reserves to loans and borrowers return 60 percent of these funds to National Bank as transaction deposits. Complete this question by entering your answers in the tabs below. Required A Required B Show the balance sheet of the Federal Reserve and National Bank if National Bank converts all excess reserves to loans, but borrowers return only 50 percent of these funds to National Bank as transaction deposits. (Enter your answers in millions. Do not round intermediate calculations. Round your "Panel B" answers to 3 decimal places. (e.g., 32.161)) Panel A: Initial Balance Sheets Assets Assets Panel B: Balance Sheet after All Changes Assets Assets Federal Reserve Bank million million million Federal Reserve Bank million National Bank million million National Bank < Required A Liabilities Liabilities Liabilities Liabilities Required B > million million million million
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