In aggregate, all banks in the US have totaldeposits of $8.2 trillion. Banks lend out allmoney they have in excess of requiredreserves and borrowers redeposit 70% of thefunds they borrow. What is the new total ofdeposits across all banks if the FederalReserve changes the reserve requirementfrom 11% to the following percent? Note:answer in trillions of dollars, report up to twodecimal places.а. 8%5. 10%с. 12%d. 15%

a. Calculate the new total deposit as follows: New deposit = Old deposit-Old deposit×Reserve…

Answered: In aggregate, all banks in the US have…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 4P

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In aggregate, all banks in the US have total deposits of $8.2 trillion. Banks lend out all money they have in excess of required reserves and borrowers redeposit 70% of the funds they borrow. What is the new total of deposits across all banks if the Federal Reserve changes the reserve requirement from 11% to the following percent? Note: answer in trillions of dollars, report up to two decimal places. 8% 10% 12% 15%
MHM Bank currently has$750million in transaction deposits on its balance sheet. The current reserve requirement is 8 percent, but the Federal Reserve is increasing this requirement to 10 percent. a. Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts all excess reserves to loans, but borrowers return only 50 percent of these funds to MHM Bank as transaction deposits.
Consider a bank policy to hold reserves equal to 15% of bank deposits. The bank currently has $25 million in deposits and holds $1 million of excess reserves. What is the required reserve on a new deposit of $500,000? Please answer in dollars. If the Fed decides to conduct contractionary monetary policy by selling $250 million in UST bonds, how much will the money supply change by if the required reserve ration is 15%? Please express you answer in millions of dollars.
Bank Three currently has $650 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 6 percent of transaction deposits. a. If the Federal Reserve decreases the reserve requirement to 4 percent, show the balance sheet of Bank Three and the Federal Reserve System just before and after the full effect of the reserve requirement change. Assume Bank Three withdraws all excess reserves and gives out loans and that borrowers eventually return all of these funds to Bank Three in the form of transaction deposits
A commercial bank estimates that its fixed rate assets are earning an average interest income of 10%, while its variable rate liabilities are forecast to pay the interest rates below: End of Year 0 1 2 3 4 5 LIBOR 7% 8% 12% 13% 11% Interest Rate Ceiling 10% 10% 10% 10% 10% Suppose it sets up an interest rate ceiling arrangement with another financial institution at 10%. Assuming a notional amount of $50,000,000 and using the LIBOR forecast for each year to discount back the payments incurred, what would be the present value of these payments?
Cal Bank believes the US Dollar will appreciate over the next five days from GHS 4.48 to GHS 4.50. The following annual interest rates apply: Currency Lending Rate Borrowing RateDollars 7.10% 7.50%Ghana Cedis 6.80% 7.25% Cal Bank has the capacity to borrow either GHS 10 million or $5 million. If Cal Bank's forecast is correct, what will its dollar profit be from speculation over the five-day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)?
Bank Three currently has $600 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 10 percent of transaction deposits. (LG 4-3) If the Federal Reserve decreases the reserve requirement to 8 percent, show the balance sheet of Bank Three and the Federal Reserve System just before and after the full effect of the reserve requirement change. Assume Bank Three withdraws all excess reserves and gives out loans and that borrowers eventually return all of these funds to Bank Three in the form of transaction deposits. Redo part (a) using a 12 percent reserve requirement.
Suppose NewBank decides to invest $273 million in30-day T-bills. The T-bills are currently trading at$4,981 (including commissions) for a $4,940 face valueinstrument. How many T-bills do they purchase? Whatdoes the balance sheet look like?
Bank Three currently has $850 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 6 percent of transaction deposits. a. If the Federal Reserve decreases the reserve requirement to 4 percent, show the balance sheet of Bank Three and the Federal Reserve System just before and after the full effect of the reserve requirement change. Assume Bank Three withdraws all excess reserves and gives out loans and that borrowers eventually return all of these funds to Bank Three in the form of transaction deposits.b. Redo part (a) using a 10 percent reserve requirement.
Mississippi Company borrows ¥80,000,000 at a time when the exchange rate is 110 ¥/$. Principal is to be repaid two years from now, and interest is for the yen bond is 4% per annum, paid annually in yen. Suppose the yen is expected to depreciate relative to the dollar to 120 ¥/$ in one year, and 125¥/$ in two years. Under these circumstances, what would be the effective dollar cost of this loan for Mississippi Company? Please enter your answer as % -- e.g. if your answer is 2.34% type in 2.34.
Bank A expects the New Zealand dollar (NZ$) is going to appreciate in the next five days from $0.48 to $0.50, and the following annual interest rates are: Currency Lending Rate Borrowing Rate Dollars 7.10% 7.50% New Zealand dollar (NZ$) 6.80% 7.25% Bank A has the capacity to borrow either NZ$10 million or $5 million. If the bank's expectation is correct, the dollar profit can be generated over the five-day period is ___________. A. $134,862 B. $491,225 C. $503,320 D. $208,044
ABC Bank believes the New Zealand dollar will appreciate over the next five days from $.48 to $.50. The following annual interest rates apply: Currency Lending Rate Borrowing Rate Dollars 7.10% 7.50% New Zealand dollar (NZ$) 6.80% 7.25% ABC Bank has the capacity to borrow either NZ$10 million or $5 million. If ABC Bank's forecast is correct, what will its dollar profit be from speculation over the five-day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)? Also, find % profit.

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