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Consider a bank with the following balance sheet: Assets Desired reserves $10 Excess reserves $24 Loans $70 million million million Liabilities Chequable deposits $120 million
Consider a bank with the following balance sheet: Assets Desired reserves $10 Excess reserves $24 Loans $70 million million million Liabilities Chequable deposits $120 million Bank capital - $16 million Assume that desired reserves are 8%. To avoid insolvency, regulators decide to provide the bank with $24 million in bank capital. However, the bad news about mortgages is featured in the local newspaper, causing a bank run. As a result, $25 million in deposits is withdrawn. Show the effects of the capital injection and bank run on the balance sheet. (Round your responses to the nearest whole number.) Assets Desired reserves $ million Liabilities Chequable deposits $ Bank capital $ million Excess reserves $ million million Loans $ million Was the capital injection enough to stabilize the bank? The bank now has a capital ratio of %, and the bank is (Round your response to one decimal place.) If the bank regulators decide that the bank needs a capital ratio of 10% to prevent further runs on the bank, how much of an additional capital injection would be required to reach a 10% capital ratio? Bank regulators need to inject an additional $ million to reach a 10% capital ratio. (Round your response to one decimal place.)
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