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In the example below, we will use year-end assets. Bank A receives $70 in deposits at 5% and, together with 40 in equity, makes a loan of $90 at 7%. The remaining of assets is G-Bond. We will ignore taxes for the moment. Bank A Cash Reserves for Deposit  ? Loan 7%                              $90 G-Bond   5%                             ? Deposits    5%                             $70 Equity                                           $40 Total Assets                       $? Total Equity and Deposit        $110  If Cash Reserves for deposit is at least 8% of the deposit under the Basel Accord, how much of the G-Bond Bank A should purchase?         $17       $14       $16       $18       $20       $15       $19       $21

In the example below, we will use year-end assets. Bank A receives $70 in deposits at 5% and, together with 40 in equity, makes a loan of $90 at 7%. The remaining of assets is G-Bond. We will ignore taxes for the moment. Bank A Cash Reserves for Deposit  ? Loan 7%                              $90 G-Bond   5%                             ? Deposits    5%                             $70 Equity                                           $40 Total Assets                       $? Total Equity and Deposit        $110  If Cash Reserves for deposit is at least 8% of the deposit under the Basel Accord, how much of the G-Bond Bank A should purchase?         $17       $14       $16       $18       $20       $15       $19       $21

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 30P
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  • In the example below, we will use year-end assets. Bank A receives $70 in deposits at 5% and, together with 40 in equity, makes a loan of $90 at 7%. The remaining of assets is G-Bond. We will ignore taxes for the moment.

Bank A

Cash Reserves for Deposit  ?

Loan 7%                              $90

G-Bond   5%                             ?

Deposits    5%                             $70

Equity                                           $40

Total Assets                       $?

Total Equity and Deposit        $110

 If Cash Reserves for deposit is at least 8% of the deposit under the Basel Accord, how much of the G-Bond Bank A should purchase?

 

 
   

$17

 
   

$14

 
   

$16

 
   

$18

 
   

$20

 
   

$15

 
   

$19

 
   

$21

 
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