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Consider the following balance sheet. Assets Liabilities Required Reserves 200 Demand Deposits 800 Excess Reserves 100 Saving Deposits 0 Loans from the Bonds 700 0
Consider the following balance sheet. Assets Liabilities Required Reserves 200 Demand Deposits 800 Excess Reserves 100 Saving Deposits 0 Loans from the Bonds 700 0 FED Loans 0 Bank Capital 200 Assume that the bank pays no interest on Demand Deposits. Furthermore, assume that the market interest rate remains constant and equal to 10%. Assume that the bank holds 7 bonds and each is worth 100 and has a face value of 100. In addition assume that the FED pays 1% in interest on required reserves and pays 0% interest on excess reserves. What is the return on assets in the case of this bank? ('7 8% (\"7 9% 5\": 7.2% (\"7 10%
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