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6. Use the bank balance sheet below to answer the following questions. (a) What is the bank's net worth? [5 points] (b) If the reserve
6. Use the bank balance sheet below to answer the following questions. (a) What is the bank's net worth? [5 points] (b) If the reserve requirement is 10 percent, what is the amount of "excess reserves" held by this bank? [5 points] (c) What is this bank's leverage ratio? [5 points] (d) Assume the bank experiences loan defaults of $1,000, and at the same time depositors withdraw $500 from the bank. What happens to the solvency of the bank? How does this fit into the story of the Great Recession and the financial crisis of 2008? [15 points]
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