Homework Answers
A)
Assets
Reserves =12.5% of 800 = $100
Bank capital =$200
Loans =$700
Liabilities
Deposits =$ 800
Equity =bank capital = total assets- total liabilities
= 1000 -800= $200
B)
Leverage ratio
The leverage ratio measures a bank's core capital to its total assets. The ratio uses tier 1 capital to judge how leveraged a bank is in relation to its consolidated assets. .The higher the tier 1 leverage ratio, the higher the likelihood of the bank withstanding negative shocks to its balance sheet.
Leverage ration= (200/1000)=1/5= 0.2
C)new balance sheet
Asset's
Bank capital =$200
Reserves=$100
Loan's = 0.9 *700= $630( 10% of loans are worthless)
Liabilities
DEPOSITS= $800
NEW equity = new capital = 930-800=$130
D) (70/1000)*100= 7% of decline in bank total asset's
(70/200)*100 = 35% decline in capital
Decline in bank capital is more than decline in total assets because 35% > 7%
Happy learning
Pls do like
Add Answer to:
6. Happy Bank starts with $200 in bank capital. It then accepts $800 in deposits. It...
3. Happy Bank starts with $200 in bank capital. It then accepts $800 in deposits. It...
3. Happy Bank starts with $200 in bank capital. It then accepts $800 in deposits. It keeps 12.5 percent (1/8th) of deposits in reserve. It uses the rest of its assets to make loans. a. Show the balance sheet of Happy Bank. b. What is Happy Bank’s leverage ratio? c. Suppose that 10 percent of the borrowers from Happy Bank default and these bank loans become worthless. Show the bank’s new balance sheet. d. By what percentage do the bank’s...
4. Bank Leverage (Based on Mankiw Ch. 4 #9). Jimmy Paul Miller starts his own bank,...
4. Bank Leverage (Based on Mankiw Ch. 4 #9). Jimmy Paul Miller starts his own bank, called JPM. As owner, Jimmy puts in $2,000 of his own money. JPM then borrows $4,000 in a long-term loan from Jimmy's uncle, accepts $14,000 in demand deposits from his neighbors, buys $7,000 of U.S. Treasury bonds, lends $10,000 to local businesses, and keeps the remainder of the bank's assets as reserves at the Fed. a.) Show JPM's balance sheet. What is JPM's leverage...
MHM Bank currently has $850 million in transaction deposits on its balance sheet. The current reserve...
MHM Bank currently has $850 million in transaction deposits on its balance sheet. The current reserve requirement is 8 percent, but the Federal Reserve is increasing this requirement to 10 percent. a. Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts all excess reserves to loans, but borrowers return only 60 percent of these funds to MHM Bank as transaction deposits. b. Show the balance sheet of the Federal Reserve and MHM Bank if...
The Monetary System - Work It Out: Question 1 of 2 Brenda Olivia Adams starts her...
The Monetary System - Work It Out: Question 1 of 2 Brenda Olivia Adams starts her own bank, called BOA. As owner, Brenda puts in $1500 of her own money. BOA then borrows $4000 in a long-term loan from Brenda's roommate, accepts $6000 in demand deposits from her neighbors, buys $1000 of corporate bonds, lends $7000 to local businesses to finance new investments, and keeps the remainder of the bank's assets as reserves at the Fed. b. Now assume an...
MHM Bank currently has $250 million in transaction deposits on its balance sheet. The current reserve...
MHM Bank currently has $250 million in transaction deposits on its balance sheet. The current reserve requirement is 10 percent, but the Federal Reserve is increasing this requirement to 12 percent. a. Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts all excess reserves to loans, but borrowers return only 80 percent of these funds to MHM Bank as transaction deposits. b. Show the balance sheet of the Federal Reserve and MHM Bank if...
MHM Bank currently has $350 million in transaction deposits on its balance sheet. The current reserve...
MHM Bank currently has $350 million in transaction deposits on its balance sheet. The current reserve requirement is 8 percent, but the Federal Reserve is increasing this requirement to 10 percent. a. Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts all excess reserves to loans, but borrowers return only 70 percent of these funds to MHM Bank as transaction deposits. b. Show the balance sheet of the Federal Reserve and MHM Bank if...
National Bank currently has $500 million in transaction deposits on its balance sheet. The current reserve...
National Bank currently has $500 million in transaction deposits
on its balance sheet. The current reserve requirement is 10
percent, but the Federal Reserve is decreasing this requirement to
8 percent.
a. Show the balance sheet of the Federal Reserve
and National Bank if National Bank converts all excess reserves to
loans, but borrowers return only 50 percent of these funds to
National Bank as transaction deposits.
b. Show the balance sheet of the Federal Reserve
and National Bank if...
MHM Bank currently has $900 million in transaction deposits on its balance sheet. The current reserve...
MHM Bank currently has $900 million in transaction deposits on its balance sheet. The current reserve requirement is 8 percent, but the Federal Reserve is increasing this requirement to 10 percent. a. Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts all excess reserves to loans, but borrowers return only 70 percent of these funds to MHM Bank as transaction deposits. b. Show the balance sheet of the Federal Reserve and MHM Bank if...
This is for Required A BSW Bank currently has $450 million in transaction deposits on its...
This is for Required A
BSW Bank currently has $450 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 10 percent of transaction deposits a. If the Federal Reserve decreases the reserve requirement to 6 percent, show the balance sheet of BSW and the Federal Reserve System just before and after the full effect of the reserve requirement change. Assume BSW withdraws all excess reserves and gives out loans and that...
MHM Bank currently has $900 million in transaction deposits on its balance sheet. The current reserve...
MHM Bank currently has $900 million in transaction deposits on its balance sheet. The current reserve requirement is 8 percent, but the Federal Reserve is increasing this requirement to 10 percent. a. Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts all excess reserves to loans, but borrowers return only 60 percent of these funds to MHM Bank as transaction deposits. (Enter your answers in millions. Do not round intermediate calculations. Round your "Panel...
4. Bank Leverage (Based on Mankiw Ch. 4 #9). Jimmy Paul Miller starts his own bank, called JPM. As owner, Jimmy puts in $2,000 of his own money. JPM then borrows $4,000 in a long-term loan from Jimmy's uncle, accepts $14,000 in demand deposits from his neighbors, buys $7,000 of U.S. Treasury bonds, lends $10,000 to local businesses, and keeps the remainder of the bank's assets as reserves at the Fed. a.) Show JPM's balance sheet. What is JPM's leverage...
MHM Bank currently has $850 million in transaction deposits on its balance sheet. The current reserve requirement is 8 percent, but the Federal Reserve is increasing this requirement to 10 percent. a. Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts all excess reserves to loans, but borrowers return only 60 percent of these funds to MHM Bank as transaction deposits. b. Show the balance sheet of the Federal Reserve and MHM Bank if...
The Monetary System - Work It Out: Question 1 of 2 Brenda Olivia Adams starts her own bank, called BOA. As owner, Brenda puts in $1500 of her own money. BOA then borrows $4000 in a long-term loan from Brenda's roommate, accepts $6000 in demand deposits from her neighbors, buys $1000 of corporate bonds, lends $7000 to local businesses to finance new investments, and keeps the remainder of the bank's assets as reserves at the Fed. b. Now assume an...
MHM Bank currently has $250 million in transaction deposits on its balance sheet. The current reserve requirement is 10 percent, but the Federal Reserve is increasing this requirement to 12 percent. a. Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts all excess reserves to loans, but borrowers return only 80 percent of these funds to MHM Bank as transaction deposits. b. Show the balance sheet of the Federal Reserve and MHM Bank if...
MHM Bank currently has $350 million in transaction deposits on its balance sheet. The current reserve requirement is 8 percent, but the Federal Reserve is increasing this requirement to 10 percent. a. Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts all excess reserves to loans, but borrowers return only 70 percent of these funds to MHM Bank as transaction deposits. b. Show the balance sheet of the Federal Reserve and MHM Bank if...
National Bank currently has $500 million in transaction deposits
on its balance sheet. The current reserve requirement is 10
percent, but the Federal Reserve is decreasing this requirement to
8 percent.
a. Show the balance sheet of the Federal Reserve
and National Bank if National Bank converts all excess reserves to
loans, but borrowers return only 50 percent of these funds to
National Bank as transaction deposits.
b. Show the balance sheet of the Federal Reserve
and National Bank if...
MHM Bank currently has $900 million in transaction deposits on its balance sheet. The current reserve requirement is 8 percent, but the Federal Reserve is increasing this requirement to 10 percent. a. Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts all excess reserves to loans, but borrowers return only 70 percent of these funds to MHM Bank as transaction deposits. b. Show the balance sheet of the Federal Reserve and MHM Bank if...
This is for Required A
BSW Bank currently has $450 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 10 percent of transaction deposits a. If the Federal Reserve decreases the reserve requirement to 6 percent, show the balance sheet of BSW and the Federal Reserve System just before and after the full effect of the reserve requirement change. Assume BSW withdraws all excess reserves and gives out loans and that...
MHM Bank currently has $900 million in transaction deposits on its balance sheet. The current reserve requirement is 8 percent, but the Federal Reserve is increasing this requirement to 10 percent. a. Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts all excess reserves to loans, but borrowers return only 60 percent of these funds to MHM Bank as transaction deposits. (Enter your answers in millions. Do not round intermediate calculations. Round your "Panel...
Most questions answered within 3 hours.
-
Which statement is true about the F(x,y,z) = x(yz'+x'y)
F is 1 when x is 0,...
asked 29 minutes ago -
60. Which of the following is an example of the right
to work law passed in...
asked 46 minutes ago -
“We must differentiate our mindset first and our lessons
second.” (Dweck, 2012). What does this saying...
asked 2 hours ago -
A plane is flying 192 m/s north relative to the air. The wind is
blowing 171...
asked 2 hours ago -
1. What is the concentration of HOAc in a 0.1M Acetate buffer,
pH 11.00?
(pKa for...
asked 2 hours ago -
What is the pressure of the gas in the flask when the levels of
water in...
asked 2 hours ago -
A team of 3 players is to be selected from a total of 10
players. What...
asked 2 hours ago -
(b) For a chi-squared distribution, find k when sample size is
30. P(k < X2 <...
asked 3 hours ago -
what was the average acceleration of the car from 40
seconds to 46 seconds? Include the...
asked 3 hours ago -
You wonder whether men or women are more likely to be driving
when both a man...
asked 3 hours ago -
Residents of two states were surveyed regarding whether or not
they were fans of professional football...
asked 3 hours ago -
how many constitutional isomers are there for a molecule having
the molecular formula c3h8o
asked 3 hours ago