Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Oldhat Financial starts its first day of operations with $8 million in capital. A total of S135 million in checkable deposits are received. The
Oldhat Financial starts its first day of operations with $8 million in capital. A total of S135 million in checkable deposits are received. The bank makes a $30 million commercial loan and another $50 million in mortgages, with the following terms: 200 standard 30-year, fixed-rate mortgages with a nominal annual rate of 5.25%, each for $250,000. Assume that required reserves are 8%. The bank's balance sheet is shown below: Assets $11 Liabilities Required reserves Excess reserves Checkable deposits Bank capital $135 million $8 million million $52 $80 million Loans million Early the next day the bank invests $35 million of its excess reserves in commercial loans. Later that day, terrible news hits the mortgage markets, and mortgage rates jump to 13%, implying a present value of its current mortgage holdings of $124,798 per mortgage. Bank regulators force Oldhat to sell its mortgages to recognize the fair market value. What does Oldhat's balance sheet look like? (Round your responses to the nearest whole number. Use a minus sign to enter negative numbers.) Fill in the blanks in the actual balance sheet as it would look after the sale: Assets Liabilities Required reserves million Checkable deposits 2$ million Excess reserves $1 million Bank capital million Loans million The bank is now %24
Step by Step Solution
★★★★★
3.54 Rating (158 Votes )
There are 3 Steps involved in it
Step: 1
ANSWER Now the bank invests 35 MN of excess reserves in commercial loans So the new commerci...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started