An FI is planning to issue $100 million in BB rated commercial loans. The FI BB rated

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An FI is planning to issue $100 million in BB rated commercial loans. The FI BB rated will finance the loans by issuing demand deposits.

a. What is the minimum amount of capital required by the Basel accord?

b. What is the minimum amount of demand deposits needed to fund this loan assuming there is a 10 percent average reserve requirement on demand deposits?

c. Show a simple balance sheet with total assets, total liabilities, and equity if this is the only project funded by the bank.

d. How does this balance sheet differ from Table 26-1? Why?

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