Question
a. Prepare the balance sheet of a bank that has $20 million in reserves, $40 million in securities, $140 million in loans, $1590 million in
a. Prepare the balance sheet of a bank that has $20 million in reserves, $40 million in securities, $140 million in loans, $1590 million in deposits, and $50 million in equity capital. What are the banks excess reserves if the reserve requirement is 10% of deposits?
b. Suppose that checks drawn on the banks result in withdrawals of $10 million. Prepare a revised balance sheet. What are the banks excess reserves now? How much does the bank need to borrow?
c. Suppose that the bank borrows half of its reserve deficiency in the federal funds market and the other half from the Fed. Prepare another balance sheet showing his.
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