Bank XYZ Balance Sheet LIABILITIES Total reserves Checkable deposits $4,000,000 $3,800,000 $200,000 Required reserves Excess reserves $3,600,000 $200,000 Loans The required reserve ratio is 0.05. If the Federal Reserve buys $1,000,000 worth of bonds from a bond dealer who has her account at Bank XYZ above and she deposits the entire $1,000,000 into a checking account at Bank XYZ, what will be the new required and excess reserves for this bank (assume no new loans are made)? (Remember that required reserves are found by applying the required reserve ratio to the amount of total checkable deposits.) Total checkable deposits at Bank XYZ grow by $ because of this deposit from the broker. Bank XYZ is now required to hold an additional $ additional $ as required reserves due to this $1,000,000 deposit into a checking account and can now lend an due to this $1,000,000 deposit into a checking account. Fill in the blanks in the table below to complete the T-account of Bank XYZ from the new $1,000,000 deposit in to a checking account. ASSETS LIABILITIES Checkable deposits $ Total reserves Required reserves Excess reserves Loans $200,000 ASSETS

Bank XYZ Balance Sheet LIABILITIES Total reserves Checkable deposits $4,000,000 $3,800,000 $200,000 Required reserves Excess reserves $3,600,000 $200,000 Loans The required reserve ratio is 0.05. If the Federal Reserve buys $1,000,000 worth of bonds from a bond dealer who has her account at Bank XYZ above and she deposits the entire $1,000,000 into a checking account at Bank XYZ, what will be the new required and excess reserves for this bank (assume no new loans are made)? (Remember that required reserves are found by applying the required reserve ratio to the amount of total checkable deposits.) Total checkable deposits at Bank XYZ grow by $ because of this deposit from the broker. Bank XYZ is now required to hold an additional $ additional $ as required reserves due to this $1,000,000 deposit into a checking account and can now lend an due to this $1,000,000 deposit into a checking account. Fill in the blanks in the table below to complete the T-account of Bank XYZ from the new $1,000,000 deposit in to a checking account. ASSETS LIABILITIES Checkable deposits $ Total reserves Required reserves Excess reserves Loans $200,000 ASSETS

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Stealth bank holds deposits of $200 million. It holds reserves of $15 million. It has purchased government bonds worth $75 million. The current value of its loans, if sold at market value, is $130 million. What is the value of the Stealth bank’s liabilities? a) $200 million b) $330 million c) $20 million d) $5 million
Balance sheet of the Summer bank Assets Liabilities Cash $ 8,000 Deposited with the Fed $ 6,000 Loans $ 116,000 Deposits $ 80,000 Capital $ 50,000 Total $ 130,000 Total $ 130,000 The required reserve ratio (RRR) on all deposits is 8% a. What, if any, are this bank's excess reserves? b. How much new amount of loan will this bank be able to create because of the excess reserves?
Set up the following balance sheet for Pumpernickel Bank: They have $10 million in customer deposits, $2 million in reserves, $5.5 million in loans, $3.5 million in bonds, and a $1 million net worth. Sketch the changes to the balance sheet if the following two changes occur: (1) the Federal Reserve changes the reserve requirement from 5% to 10%, and (2) the Fed sells $1 million bonds to Pumpernickel.
A new bank has vault cash of $1.7 million and $5 million in deposits held at its Federal Reserve District Bank. a) the required reserves ratio is 8 percent, approximately what dollar amount of deposits can the bank hold? (Answer in millions) Bank deposits $Type your answer here million b) If the bank holds $72 million in deposits and currently holds bank reserves such that excess reserves are zero, what required reserves ratio is implied? (Round answer to 1 decimal place, e.g. 5.1.) Required reserves ratio Type your answer here
Assets Liabilities Reserves: $30,000 Demand Deposits: $100,000 Loans: $70,000 Equity (net worth): $2,000 Property: $2,000 Assume the reserve requirement ratio is 20%. C. Assume that Elliot raises $5,000 in cash from a yard sale and deposits the cash in his checking account at the Bank of America. By how much does the money supply immediately change as a result of Elliot's deposit? D. Calculate the maximum change in demand deposits in the banking system as a whole resulting from Elliot's deposit. Show your work. E. If the Bank of America is not meeting the reserve requirement, what action can it take to meet the reserve requirement without calling in loans or selling property?
Company Flora has the following items on its B/S: Money at bank ( no maturity) : USD 52,000 at 1% LT securities (2 years) : USD 135,000 invested at 10% Overdraft from bank (no maturity): USD 17,000 at 4% Equity ( 5 years) : USD 100,000 LT borrowings (2 years): USD 120,000 at 3% Financial assets (5 years): USD 135,000 at 1.5% ST borrowings (8 months): USD 119,000 at 8% Calculate the net interest margin for the company? (total inflows from interest - total outflows from interest) *
Q25 Examine the chart below which contains Bank 1’s balance sheet. If the legal reserve requirement is 40%, then excess reserves are?: Assets Liabilities Total Reserves ? Demand Deposits $600,000 Loans $300,000 Question 25 options: a) $360,000 b) $60,000 c) $240,000 d) $120,000
Assets Liabilities and Equity Reserves $5,000 Demand deposits $20,000 Business loans $10,000 Student loans $8,000 Government securities $2,000 Equity (Net worth) $5,000 Total assets $25,000 Total liabilities and equity $25,000 The following is a balance sheet for Smith Bank. Assume a 10% reserve requirement. A. Calculate a 10% reserve requirement B. Calculate the maximum amount of additional loans that Smith Bank can make without selling its holdings of government securities. C. Assuming that Smith Bank and other banks now lend out all excess reserves, calculate the maximum possible change in the following: i. Demand deposits throughout the banking system ii. Total reserves throughout the banking system D. Suppose that the country's central bank purchases $1,000 of Smith Bank's holdings of government securities as part of its open market operations. Do…
c. A bank enters a reverse repurchase agreement in which it agrees to buy treasury security from one of its correspondent bank at a price of 10 million with the promise to sell the securities back at a price of kshs. 10,008,548 after 5 days. Calculate bond the discount yield for the investing banks.
The Central Bank requires banks to maintain a 10% legal minimum reserve requirement of their deposits. Bank A with total deposits of $100 million isfully loaned up. This means that Bank A has excess reserves of A. 0 B. $10 million C. $1,000 million
Assets- reserves: 75000 loans : 430000 liabilities : deposites : 500000 net worth : 5000 a) Suppose that a bank has the following balance sheet and you deposit $5000 in currency into your cheque account at such bank. Use a T-account to show the initial impact of this transaction on the bank’s balance sheet. What is the impact of this transaction on M1? (b) If the bank holds a reserve ratio of 0.1, what is the maximum amount the bank can loan out. Suppose that the bank intends to loan out the maximum amount it can. Show the impact of the loan on the balance sheet.
Question 1 NewBank started its first day of operations (1 April, 2021) with $6 million in capital. $100 million in checkable deposits is received. The bank issues a $25 million commercial loan and another $25 million in mortgages, with the following terms:  Mortgages: 100 standard 30-year, fixed-rate with a nominal annual rate of 5.25% each for $250,000.  Commercial loan: 3-year loan, simple interest paid monthly at 0.75%/month. If required reserves are 8%, what does the bank balance sheets look like? Ignore any loan loss reserves. Question 2 NewBank decides to invest $45 million in 30-day T-bills. The T-bills are currently trading at $4,986.70 (including commissions) for a $5,000 face value instrument. What does the balance sheet look like? Question 3On the 3rd day of operations (3 April, 2021), deposits fall by $5 million. What does the balance sheet look like? Are there any problems? Question 4 To meet any shortfall in the previous question, NewBank will borrow the cash in the…