In the following bank balance sheet amounts are in millions, Ask an Expert

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In the following bank balance sheet, amounts are in millions of dollars. The required reserve ratio is 3% on the first $30 million of checkable deposits and 12% on any checkable deposits over $30 million

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a. Calculate the bank's excess reserves.

b. Suppose that the bank sells $5 million in securities to get new cash. Show the bank's balance sheet after this transaction. What are the bank's new excess reserves?

c. Suppose that the bank loans its excess reserves in part (b) to a local business. Show the bank's balance sheet after the loan has been made but before the business has spent the proceeds of the loan. Now what are the bank's excess reserves?

d. Suppose that the business spends the proceeds of the loan by writing a check. Revise the bank's balance sheet and calculate its excess reserves after the check has cleared.

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Financial Management, Finance

Category:- Financial Management
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