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Consider a bank with the following balance sheet: Assets Desired reserves $10 Excess reserves $17 Loans $80 million million million Liabilities Chequable deposits $120 million
Consider a bank with the following balance sheet: Assets Desired reserves $10 Excess reserves $17 Loans $80 million million million Liabilities Chequable deposits $120 million Bank capital - $13 million Assume that desired reserves are 8%. To avoid insolvency, regulators decide to provide the bank with $21 million in bank capital. However, the bad news about mortgages is featured in the local newspaper, causing a bank run. As a result, $35 million in deposits is withdrawn.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 $7 million Excess reserves S6 million Loans $ 80 million Liabilities Chequable deposits 585 Bank capital 58 million million Was the capital injection enough to stabilize the bank? The bank now has a capital ratio of 8.6%, and the bank is well capitalized (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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