Question

1. You live in a world with a universal 8% required reserve rate for all depository institutions. Assume an international visitor deposits $20,000 in the bank. What will the change in the bank’s T-account look like immediately after the deposit? Assuming the bank wants no excess reserves, what would its T-account look like after it loans out the excess reserves? What would be the ending T-account if no bank held excess reserves (following the $20,000 deposit)?

2. What is the price of a bond which matures in 6 years, has a 6% coupon rate, and its YTM is 5%?

Answer 1

Date: MON TUE WED THU FRI SAT SUN 7 1. Bank T- Acourt post the deposit Liabilities Liabilities Assets Assets (in 600's) mmmmmmmmm 1.6 Deposits Inv. in 6. sect +20 Bank + 18.4 * Reserve Securities Balance maintained is specified gout or balance maintained with reserve bark. 32. = The even T-account would look if the bark loans out the same excess reserves reserves similar excess show 33. 3 3 The ending are maintained balance as T- Account if no would still in question 1