1. How does bank capital reduce bank risk?
Answer : It provides a cushion for firms to absorb losses.
2. How do capital requirements constrain bank growth?
Answer : By limiting the amount of new assets that a bank can acquire through debt financing.
3. A bank is currently exactly meeting its reserve requirements of 10%. If the bank deposit outflow of $10,000,000 what is the impact on its required reserve position.
Answer : It is now deficient $1,000,000 in required reserves.
( ) How does bank capital reduce bank risk? It provides a cushion for firms to...
Suppose that Mountain Star Bank discovers that its reserves will temporarily fall slightly below those legally required. How might it temporarily remedy this situation through the Federal funds market? Now assume Mountain Star finds that its reserves will be substantially and permanently deficient. What remedy is available to this bank? How would a decrease in the reserve requirement affect the (a) size of the money multiplier, (b) amount of excess reserves in the banking system, and (c) extent to which...
Question 3 A bank has the following assets and liabilities: Mortgage Loans: $240 million Consumer Loans: $250 million Discount Loans: $25 million Demand Deposits: $400 million NOW Deposits: $100 million Treasuries: $25 million Municipal Bonds: $10 million a) The bank has 10% in required reserves and 8% in excess reserves. Calculate the bank capital and show the balance sheet of the bank. b) Assume that net profits after taxes are $6 million. Calculate ROA, ROE, EM, leverage ratio, and capital...
Consider the following Bank balance sheet (assume Reserve Requirement Ratio is zero) Liabilities Assets Excess Reserves +10M Deposits +100M Government Bonds £20M Loans Ł80M Bank Capital +10M a. Suppose interest rate on loans and government bonds is 10%, interest rate on deposits is 8%, and interest rate on excess reserves is 0%. What is the Bank's net return on assets? Compute the return on equity. b. Suppose the risk weights imposed by the bank regulator on loans, securities, and reserves...
2.2. Complete the table below for the Third National Bank. You have to distinguish between a bank's assets and bank's liabilities. The figures in the table below are for the Third National Bank. All figures are in thousands of dollars. Assets Liabilities and Net Worth Stock Shares $ 420 $ _____ $ _____ Reserves 25 _____ _____ Property 300 ____ _____ Securities 100 ____ _____ Loans 100 ____ _____ Demand Deposits 105 ____ _____ 2.3. What is the total assets...
Suppose that Big Bucks Bank has the simplified balance sheet shown below. The reserve ratio is 20 percent. Instructions: Enter your answers as whole numbers. a. What is the maximum amount of new loans that Big Bucks Bank can make? Show in columns 1 and 1' how the bank's balance sheet will appear after the bank has lent this additional amount. b. By how much has the supply of money changed? c. How will the...
If this balance sheet depicts the only bank in the economy, how large is M1? a-$5 million b-$10 million c-$15 million d-$60 million e-$65 million Given the balance sheet above and assuming a required reserve ratio of 20%, which of the following accurately describes the bank's situation? a-it is failing to meet its reserve requirement b-it is just meeting its reserve requirement, but has no excess reserves c-it is meeting its reserve requirement, and has $5 million in excess...
Looking for clarification on how to do this question. Consider the following balance sheet for one of the commercial banks. Assume the desired reserve ratio is 8% Assets Reserves Loans Buildings Other assets Liabilities and capital 2.500 2.500 Demand deposits 20.000 40,000 Saving deposits 30.000 10,000 Bank's capital 10.000 7.500 What is the amount of excess reserves? Select one: a $2,500 b. $500 O C. -$2,500 O d. -S500 e. None of the above cross out cross out cross out...
For the first three questions consider the U.S.- Japan exchange rate, expressed as yen per dollar. Using the basic supply and demand diagram as illustrated at the beginning of Week 9 lecture slides, answer the following: 1. Other things being equal, an increase in the Japanese price level will shift the supply curve of dollars_________, the demand curve for dollars__________ and cause the dollar to ________. a. rightward, leftward, depreciate b. leftward, rightward, depreciate c. leftward, rightward, appreciate d. rightward,...
The table below is the current balance sheet for the Maple Leafs Bank. Answer the following questions assuming that the bank’s target reserve ratio is 10%. Suppose that there are a total of 9 other banks in the economy and that the balance sheet for the whole banking system is presented in the table below. Assume that each of the other banks also has a target reserve ratio of 10%. I need help with the empty boxes in both questions....