Suppose that a bank holds  $15m in treasury bonds  $10m in reserves  $30m of checkable deposits  $20m of time deposits  $6m of capital  How much loan does the bank have if we know it doesn't have any other assets or liabilities  Suppose that checkable deposits and reserves pay 0 interest  The interest rate on treasuries is 3% The loan pays 7% Time deposits pay 5% How much profit does the bank make? What is the bank's return on assets? 3.2% 2.9% 3.7% 2.6%

Economics:
10th Edition
ISBN:9781285859460
Author:BOYES, William
Publisher:BOYES, William
Chapter13: Monetary Policy
Section: Chapter Questions
Problem 8E
icon
Related questions
Question

Suppose that a bank holds 

$15m in treasury bonds 

$10m in reserves 

$30m of checkable deposits 

$20m of time deposits 

$6m of capital 

How much loan does the bank have if we know it doesn't have any other assets or liabilities 

Suppose that checkable deposits and reserves pay 0 interest 

The interest rate on treasuries is 3%

The loan pays 7%

Time deposits pay 5%

How much profit does the bank make?

What is the bank's return on assets?

  1. 3.2%
  2. 2.9%
  3. 3.7%
  4. 2.6%
Expert Solution
steps

Step by step

Solved in 5 steps with 3 images

Blurred answer
Knowledge Booster
Banking
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Economics:
Economics:
Economics
ISBN:
9781285859460
Author:
BOYES, William
Publisher:
Cengage Learning
Economics For Today
Economics For Today
Economics
ISBN:
9781337613040
Author:
Tucker
Publisher:
Cengage Learning
Survey Of Economics
Survey Of Economics
Economics
ISBN:
9781337111522
Author:
Tucker, Irvin B.
Publisher:
Cengage,
MACROECONOMICS FOR TODAY
MACROECONOMICS FOR TODAY
Economics
ISBN:
9781337613057
Author:
Tucker
Publisher:
CENGAGE L
Principles of Macroeconomics (MindTap Course List)
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:
9781285165912
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning