Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN: 9781337091985
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 11, Problem 6PA
Sub part (a):
To determine
The
Sub part (b):
To determine
The balance sheet and leverage ratio of the bank.
Sub part (c):
To determine
The balance sheet and leverage ratio of the bank.
Subpart (d):
To determine
The balance sheet and leverage ratio of the bank.
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2. Happy Bank starts with $200 in bank capital. It then takes in $800 in deposits. It keeps 12.5% (1/8th) of deposits in reserve. It uses the rest of its assets to make bank loans.
A.) Show the balance sheet of Happy Bank.B.) What is Happy Bank’s leverage ratio?C.) Suppose that 10% of the borrowers from Happy Bank default and these bank loans become worthless. Show the bank’s new balance sheet.
Please only answer part D
D.) By what percentage do the bank’s total assets decline? By what percentage does the bank’s capital decline? Which change is larger? Why?
The table below, shows the balance sheet of the Bruins Bank.
Assets
Reserves
Loans
Securities
Fixed assets
Total
$30
240
90
40
400
Liabilities/Equity
Demand Deposits
Shareholders' equity
Total
$360
40
400
By how much is the Bruins Bank over- or under-reserved if the target reserve ratio is as listed below.
a. If the target reserve ratio is 2.5% the Bruins Bank is over-reserved
b. If the target reserve ratio is 5.0% the Bruins Bank is over-reserved
c. If the target reserve ratio is 7.5% the Bruins Bank is over-reserved
d. If the target reserve ratio is 12.5% the Bruins Bank is under-reserved
v
by $
by $
by $
by $
Explain how a bank could optimise its position through managing its use of different financial products.
Chapter 11 Solutions
Brief Principles of Macroeconomics (MindTap Course List)
Ch. 11.1 - Prob. 1QQCh. 11.2 - Prob. 2QQCh. 11.3 - Prob. 3QQCh. 11.4 - Prob. 4QQCh. 11 - Prob. 1CQQCh. 11 - Prob. 2CQQCh. 11 - Prob. 3CQQCh. 11 - Prob. 4CQQCh. 11 - Prob. 5CQQCh. 11 - Prob. 6CQQ
Ch. 11 - Prob. 1QRCh. 11 - Prob. 2QRCh. 11 - Prob. 3QRCh. 11 - Prob. 4QRCh. 11 - Prob. 5QRCh. 11 - Prob. 6QRCh. 11 - Prob. 7QRCh. 11 - Prob. 8QRCh. 11 - Prob. 9QRCh. 11 - Prob. 10QRCh. 11 - Prob. 1PACh. 11 - Prob. 2PACh. 11 - Prob. 3PACh. 11 - Prob. 4PACh. 11 - Prob. 5PACh. 11 - Prob. 6PACh. 11 - Prob. 7PACh. 11 - Prob. 8PACh. 11 - Prob. 9PACh. 11 - Prob. 10PACh. 11 - Prob. 11PACh. 11 - Prob. 12PA
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