Churchill Bank has reserves of $100mn and loans to clients of $500mn. In addition, it has...
Churchill Bank has reserves of $100mn and loans to clients of $500mn. In addition, it has securities assets which act as collateral for the bank's own borrowing of $280mn (assume a 30% haircut was taken on the assets). The bank's only other debt is customer deposits of $500mn.
a. draw up a balance sheet for Churchill Bank
b. what is the bank's leverage ratio?
c. what is the bank's gearing?
d. what is the bank's reserves ratio?
e. what happens to the leverage multiple if the accounting value of the bank's loans is estimated to have fallen by 40%?
Homework Answers
A) Balance sheet
Asset -
Receivables - $ 500 mm
Securities - $ 196 mm (after haircut adjustment)
Liabilities + Capital
Reserves - $ 100 mm
Payables - $ 500 mm
Equity - $ 96 mm
B) Leverage ratio = Total debt/Shareholder's equty = 500/(96+100) = 2.55
C) Borrowed funds/Equity = 500/196 = 2.55
Add Answer to:
Churchill Bank has reserves of $100mn and loans to clients of
$500mn. In addition, it has...
Churchill Bank has reserves of $100m and loans to clients of $500m. In addition, it has...
Churchill Bank has reserves of $100m and loans to clients of $500m. In addition, it has securities assets which act as collateral for the bank's own borrowing of $280m (assume a 30% haircut was taken on the assets). The bank's only other debt is customer deposits of $500m. a) draw up a balance sheet for Churchill Bank b) what is the banks leverage ratio c) what is the banks gearing d) what is the banks reserve ratio e) what happens...
C. Consider the following bank balance sheet Freedom Bank Assets Liabilities Reserves $1200 Deposits $9000 Loans...
C. Consider the following bank balance sheet Freedom Bank Assets Liabilities Reserves $1200 Deposits $9000 Loans $8000 Debt $800 Securities $800 Net Equity 1. What is the net equity of this bank? 2. What is Freedom Bank's leverage ratio? 3. What does the number you got from C2 mean in plain words? What does it mean for the safety of the bank? 4. What is the bank's reserve ratio?
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....
A bank's checkable deposits are $960, its loans are $857 and the bank has reserves of...
A bank's checkable deposits are $960, its loans are $857 and the bank has reserves of $103. If the bank faces a required reserve ratio of 9%, then what are the bank's current excess reserves?
A commercial bank has reserves of $64, loans of $521 and checkable deposits of $585. The...
A commercial bank has reserves of $64, loans of $521 and checkable deposits of $585. The bank experiences a cash outflow of $11. If the required reserve ratio is 7%, what are the bank's excess reserves after the outflow?
Bank's Balance Sheet Liabilities and Owners' Equity Assets Reserves $150 Deposits $1,200 Loans $600 Debt $200...
Bank's Balance Sheet Liabilities and Owners' Equity Assets Reserves $150 Deposits $1,200 Loans $600 Debt $200 Securities $750 Capital (owners' equity) $100 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. This would also bring the leverage ratio from its initial value of to a new value of Which of the following...
1.A bank operates with reserves of $100, loans of $300 and securities of $100. The bank’s...
1.A bank operates with reserves of $100, loans of $300 and securities of $100. The bank’s only liability is deposits of $400 since it has zero debt. Calculate the bank’s leverage ratio.
10. Suppose the reserve ratio is 25%. Bank One has $12,000 deposits and $3,000 bank capital (owners' equity). Bank One...
10. Suppose the reserve ratio is 25%. Bank One has $12,000 deposits and $3,000 bank capital (owners' equity). Bank One has $3,000 securities. What are the reserves and loans? a. Draw the bank balance sheet with reserves, deposits, loans, securities and capital. b. What is the total amount of reserves? c. What is the total amount of loans? d. What is the leverage ratio? e. If $500 are deposited, how much money would be created with a reserve ratio of...
1) Bank 1 has deposits of $4141 and reserves of $455. If the required reserve ratio...
1) Bank 1 has deposits of $4141 and reserves of $455. If the required reserve ratio is 10%, what is the value of the bank's excess reserves? Enter a whole number with no dollar sign. Round to the nearest whole number. 2) In a fractional reserve banking system a. banks hold a fraction of deposits as reserves. b. the reserve ratio measures the percentage of deposits available to be lent out. c. banks hold a fraction of reserves as deposits....
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...
C. Consider the following bank balance sheet Freedom Bank Assets Liabilities Reserves $1200 Deposits $9000 Loans $8000 Debt $800 Securities $800 Net Equity 1. What is the net equity of this bank? 2. What is Freedom Bank's leverage ratio? 3. What does the number you got from C2 mean in plain words? What does it mean for the safety of the bank? 4. What is the bank's reserve ratio?
Bank's Balance Sheet Liabilities and Owners' Equity Assets Reserves $150 Deposits $1,200 Loans $600 Debt $200 Securities $750 Capital (owners' equity) $100 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. This would also bring the leverage ratio from its initial value of to a new value of Which of the following...
10. Suppose the reserve ratio is 25%. Bank One has $12,000 deposits and $3,000 bank capital (owners' equity). Bank One has $3,000 securities. What are the reserves and loans? a. Draw the bank balance sheet with reserves, deposits, loans, securities and capital. b. What is the total amount of reserves? c. What is the total amount of loans? d. What is the leverage ratio? e. If $500 are deposited, how much money would be created with a reserve ratio of...
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...
Most questions answered within 3 hours.
-
At the beginning of the period, the Fabricating Department
budgeted direct labor of $136,500 and equipment...
asked 8 minutes ago -
Please answer all
____ 28. Rent control is usually
justified on the grounds that it protects...
asked 8 minutes ago -
PARTS A-D HAVE BEEN ANSWERED. WAS TOLD TO REPOST. ONLY ANSWER
PARTS E and F.
A...
asked 26 minutes ago -
2) You are given the task of finding a representation for a
circle in a drawing...
asked 1 hour ago -
STUDY QUESTION: Does use of diet drug fen-phen
(fenfluramine-phentermine) cause valvular heart disease?
HINT: Valvular heart...
asked 1 hour ago -
1. An object weighing 40 N rests on a surface. The coefficient
of friction is 0.35....
asked 2 hours ago -
Investor company owns 35% of investee company voting stock and
accounts for the investment under the...
asked 3 hours ago -
The number of major faults on a randomly chosen 1 km stretch of
highway has a...
asked 4 hours ago -
Consider the competitive environment of Starbuck's, Progressive
Insurance, a manufacturing firm with low turnover, or a...
asked 4 hours ago -
3. Gains from trade
Consider two neighbouring island countries called Euphoria and
Contente. They each have...
asked 6 hours ago -
A business executive has the option to invest money in two
plans: Plan A guarantees that...
asked 9 hours ago -
Hello, can someone please help me answer this question?
How much heat is absorbed by a...
asked 9 hours ago