Please answer part d and balance the balance sheet 1. A group of college friends decide to start their own bank, LSU Community Bank, in ruralPennsylvania. In order to get started they put in a total of $10 million of their own money andborrow $40 million from a venture debt lender. (This is known as venture debt lending.)They accept $ 160 million in deposits from households and businesses in the community, and, inturn, make $ 90 million in loans. They also purchase $ 95 million of mortgage-backed securitiesand keep the remainder of their assets as reserves at the Philadelphia Federal Reserve DistrictBank.a. Show LSU Community Bank's balance sheet.b. What is LSU Community Bank's reserve-deposit ratio?C.What is LSU Community Bank's asset to equity ratio?d. Suppose the housing market tanks and the market value of the bank's mortgage-backedsecurities falls by 10%.i.Show LSU Community Bank's new balance sheet.ii.By what percentage does the value of the bank's assets fall?iii.By what percentage does the value of the bank's capital fall?

A banking procedure is a collection of institutions that gives us financial services. These…

Answered: 1. A group of college friends decide to…

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Savings,investment And The Financial System

Section: Chapter Questions

Problem 8PA

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Please answer part d and balance the balance sheet

1. A group of college friends decide to start their own bank, LSU Community Bank, in rural
Pennsylvania. In order to get started they put in a total of $10 million of their own money and
borrow $40 million from a venture debt lender. (This is known as venture debt lending.)
They accept $ 160 million in deposits from households and businesses in the community, and, in
turn, make $ 90 million in loans. They also purchase $ 95 million of mortgage-backed securities
and keep the remainder of their assets as reserves at the Philadelphia Federal Reserve District
Bank.
a. Show LSU Community Bank's balance sheet.
b. What is LSU Community Bank's reserve-deposit ratio?
C.
What is LSU Community Bank's asset to equity ratio?
d. Suppose the housing market tanks and the market value of the bank's mortgage-backed
securities falls by 10%.
i.
Show LSU Community Bank's new balance sheet.
ii.
By what percentage does the value of the bank's assets fall?
iii.
By what percentage does the value of the bank's capital fall?

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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