Question

Use T-account analysis to answer the following questions:

a) You just deposited $100 of cash to your chequing account at TD bank. Use the T-
account to record the change of TD bank’s balance sheet. Also write down the T-
account for yourself.

b) Suppose TD bank has a desired reserve ratio of 10%. To maximize profit, how
much of loans can TD bank make at most? Use the T-account to record the change
of balance sheet of TD bank after the maximum loans are made.
c) Suppose TD bank pays 1% of annual interest rate for chequable deposits and
charges 5% for loan interest. After one year, how much of profit can TD bank earn?
Use the T-account to record the change to balance sheet of TD bank after one year.

Answer 1

Aus! (a) Depaited $100 of care to your Chequery account at to bank bak boloma Sur (таеt) Debit (er.) I credit (cr.) Cash $100 customer Alc $100 sit Taccount for customer Desit (pr.) , creout (or.) Bank $100 Cash $100 (6) considering desired reserve ratio of 10%. TO Bank can make a loan of $90 mesecinum TO bank balance sheet cash $100 automer ALC $100 loan Alc$90 Cash $ 90

(C) df TD bank pays (7 annual intuent for deposits & charges 57. for an interest Proget (offie fyear )= sy.com $90- 1% on $100 4,55 $ - 1$ = 3.5$ то bag bugалхи Халоt Desit (Ar) / credit (oro) Cash $100 customer dee $161 dan Alc $94.5 Cash $90 Profit $3.5