1. Start with the following balance sheet (in millions of dollars) for a bank. For each segment, however, use the updated balance sheet from the previous segment as the starting point.

Assets Liabilities+Capital

Reserves 15 Deposits 145

Loans 100 Capital 20

Securities 50

a. Show the balance sheet after withdrawals of $10 million.

Assets Liabilities+Capital

Reserves Deposits

Loans Capital

Securities

b. If reserve requirements are 10%, show the balance sheet after the bank borrows in the Federal funds market to meet the reserve requirement.

Assets Liabilities+Capital

Reserves Deposits

Loans Borrowing

Securities Capital

c. Show the balance sheet after loan losses of $3 million.

Assets Liabilities+Capital

Reserves Deposits

Loans Borrowing

Securities Capital

d. Show the balance sheet after the bank sells $2.5 million worth of securities.

Assets Liabilities+Capital

Reserves Deposits

Loans Borrowing

Securities Capital