Homework Answers
C. It has insufficient deposits.
Insolvent bank's assets are less than the value of of its liabilities and also its net worth is negative. Therefore, they are not able to pay off its depositors.
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4. Which of the following is NOT true of an insolvent bank? A. B. C. D....
en 25 12 points Save Ans Consider a simple bank that has assets of $120, checking...
en 25 12 points Save Ans Consider a simple bank that has assets of $120, checking deposits of $80, and capital of $40. Recall from chapter 4 that checking deposits are liabilities of a bank. a) Complete the bank's balance sheet Assets Bank Assets Liabilities Checking Deposits Net Worth Capital b) Now suppose that the perceived value of the bank's assets falls by $10. Find the new value of bank's capital c) What is the leverage ratio? Show your work....
Question 18 1 pts Table: Bank Balance Sheet Bank Balance Sheet Assets Liabilities & Net Worth...
Question 18 1 pts Table: Bank Balance Sheet Bank Balance Sheet Assets Liabilities & Net Worth Reserves $ 10,000 Deposits $100,000 Loans 100,000 Debt 20,000 Securities 40.000 Equity 30,000 Based on the table, what is the leverage ratio and reserve-deposit ratio at the bank? Would the bank become insolvent (negative capital) with a 10% loss in the value of assets? O 5, 10% and Yes O 3,6.6% and Yes O 5, 10% and No O 3, 10% and No
Which of the following situations describes a person who could be insolvent? Multiple Choice O Assets...
Which of the following situations describes a person who could be insolvent? Multiple Choice O Assets $56,800; annual expenses $62,500 Ο Ο Assets S78,800; net worth $24,500 Ο O Liabilities $45,800; net worth $8,500 Ο Assets $40,800; liabilities $47,500 Ο Annual cash inflows $45,800; liabilities $52,500
Suppose that in a country, there are only two banks, Bank A and Bank B. The...
Suppose that in a country, there are only two banks, Bank A and Bank B. The file HW9 Bank Balance Sheets shows their balance sheets. Here are some simplifying assumptions to make our lives a bit more bearable: 1. The country uses dollars as its unit of accounts. 2. There are no travelers' checks. 3. There are no fancy accounts in this country like money market mutual funds deposits. 4. Other deposits consist of saving deposits by households as well...
4. Suppose a bank currently has the following T-Account (all values in USD) : Assets Liabilities...
4. Suppose a bank currently has the following T-Account (all values in USD) : Assets Liabilities + Net worth Loans 210,000 Deposits Government Securities 20,000 Cash Reserves ? Net worth 200,000 ? a. Assuming required reserves of 10% are met exactly by this bank, how much are their cash reserves? b. Assuming required reserves of 10% are met exactly by this bank, how much is its net worth? c. What is the bank's equity multiplier? d. If, in the next...
4. Suppose a bank currently has the following T-Account (all values in USD) : Assets Liabilities...
4. Suppose a bank currently has the following T-Account (all values in USD) : Assets Liabilities + Net worth Loans 210,000 Deposits Government Securities 20,000 Cash Reserves ? Net worth 200,000 a. Assuming required reserves of 10% are met exactly by this bank, how much are their cash reserves? b. Assuming required reserves of 10% are met exactly by this bank, how much is its net worth? C. What is the bank's equity multiplier? d. If, in the next year,...
9. Bank leverage Use the information presented in Southwestern Mutual Bank's balance sheet to answer the...
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 $200 Deposits $1,600 Loans Debt $800 $250 Securities Capital (owners' equity) $1,000 $150 Suppose a new customer adds $100 to his account at Southwestern Mutual Bank, which the owners of the bank then use to make $100 worth of new loans. This would increase the loans account and the account. increase of This...
QUESTION 2: Your bank has the following balance sheet (Unit: million). The required reserve ratio is...
QUESTION 2:
Your bank has the following balance sheet (Unit: million). The
required reserve ratio is 10%.
To fill in the following tables, instead of using a positive or
negative sign to indicate changes in the item, you need to write
down the value for items in each cell.
(A) Update the balance sheet if there is an unexpected deposit
outflow of $50 million.
(B) How much more reserves this bank needs to meet the
requirement?
(C) Write down all...
A commercial bank’s T-account in 2018 is shown as below Assets Loans: $800 Securities: $100 Reserves:...
A commercial bank’s T-account in 2018 is shown as below Assets Loans: $800 Securities: $100 Reserves: $60 Liabilities plus equity Deposits: $900 Borrowing: $0 Equity: ? The bank pays 10% for the bank deposit to the depositors; the average interest rate on the loans is 15%; the returns to its securities is 10%; and the interest rate earned from the reserves is 4% . 1. Calculate the value of equity, the value of capital ratio and the leverage ratio? 2....
QUESTION 24 A bank securitizes business loans. The Special Purpose Vehicle (SPV) and the investors in...
QUESTION 24 A bank securitizes business loans. The Special Purpose Vehicle (SPV) and the investors in Asset-Backed Securities (ABS) are depositors in that bank. On a scrap paper, represent the changes in the balance sheets of the bank and the SPV. Then use your draft to fill the following multiple blanks. The scrap paper will not be uploaded but must be kept for future reference. For each blank type a sign + or - to represent the net change (with no...
en 25 12 points Save Ans Consider a simple bank that has assets of $120, checking deposits of $80, and capital of $40. Recall from chapter 4 that checking deposits are liabilities of a bank. a) Complete the bank's balance sheet Assets Bank Assets Liabilities Checking Deposits Net Worth Capital b) Now suppose that the perceived value of the bank's assets falls by $10. Find the new value of bank's capital c) What is the leverage ratio? Show your work....
Question 18 1 pts Table: Bank Balance Sheet Bank Balance Sheet Assets Liabilities & Net Worth Reserves $ 10,000 Deposits $100,000 Loans 100,000 Debt 20,000 Securities 40.000 Equity 30,000 Based on the table, what is the leverage ratio and reserve-deposit ratio at the bank? Would the bank become insolvent (negative capital) with a 10% loss in the value of assets? O 5, 10% and Yes O 3,6.6% and Yes O 5, 10% and No O 3, 10% and No
Which of the following situations describes a person who could be insolvent? Multiple Choice O Assets $56,800; annual expenses $62,500 Ο Ο Assets S78,800; net worth $24,500 Ο O Liabilities $45,800; net worth $8,500 Ο Assets $40,800; liabilities $47,500 Ο Annual cash inflows $45,800; liabilities $52,500
Suppose that in a country, there are only two banks, Bank A and Bank B. The file HW9 Bank Balance Sheets shows their balance sheets. Here are some simplifying assumptions to make our lives a bit more bearable: 1. The country uses dollars as its unit of accounts. 2. There are no travelers' checks. 3. There are no fancy accounts in this country like money market mutual funds deposits. 4. Other deposits consist of saving deposits by households as well...
4. Suppose a bank currently has the following T-Account (all values in USD) : Assets Liabilities + Net worth Loans 210,000 Deposits Government Securities 20,000 Cash Reserves ? Net worth 200,000 ? a. Assuming required reserves of 10% are met exactly by this bank, how much are their cash reserves? b. Assuming required reserves of 10% are met exactly by this bank, how much is its net worth? c. What is the bank's equity multiplier? d. If, in the next...
4. Suppose a bank currently has the following T-Account (all values in USD) : Assets Liabilities + Net worth Loans 210,000 Deposits Government Securities 20,000 Cash Reserves ? Net worth 200,000 a. Assuming required reserves of 10% are met exactly by this bank, how much are their cash reserves? b. Assuming required reserves of 10% are met exactly by this bank, how much is its net worth? C. What is the bank's equity multiplier? d. If, in the next year,...
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 $200 Deposits $1,600 Loans Debt $800 $250 Securities Capital (owners' equity) $1,000 $150 Suppose a new customer adds $100 to his account at Southwestern Mutual Bank, which the owners of the bank then use to make $100 worth of new loans. This would increase the loans account and the account. increase of This...
QUESTION 2:
Your bank has the following balance sheet (Unit: million). The
required reserve ratio is 10%.
To fill in the following tables, instead of using a positive or
negative sign to indicate changes in the item, you need to write
down the value for items in each cell.
(A) Update the balance sheet if there is an unexpected deposit
outflow of $50 million.
(B) How much more reserves this bank needs to meet the
requirement?
(C) Write down all...
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