Question

9. Bank leverage Use the information presented in Southwestern Mutual Bank's balance sheet to answer the following questions. Bank's Balance Sheet Assets Liabilities and Owners' Equity Reserves $150 Deposits $1,200 Loans $600 Debt $200 Securities $750 Capital (owners' equity) $100 the Suppose the owners of the bank borrow $100 to supplement their existing reserves. This would increase the reserves account and increase deposits account. This would also bring the leverage ratio from its initial value of 15.00 v to a new value of 16.00 .

Which of the following do bankers take into account when determining how to allocate their assets? Check all that apply. 

• The reserve requirement 

• The size of the monetary base 

• The total value of liabilities

Answer 1

Blanks-

1) increase

2) debt

3) 150+600+750/100 = 15

4) 150+600+750+100/100 = 16

the following are correct-

-The reserve requirement