Consider the following Bank balance sheet (assume Reserve Requirement Ratio is zero) Liabilities Assets Excess Reserves +10M Deposits +100M Government Bonds 20M Loans 80M Bank Capital +10M a. Suppose interest rate on loans and government bonds is 10%, interest rate on deposits is 8%, and interest rate on excess reserves is 0%. What is the Bank's net return on assets? Compute the return on equity. b. Suppose the risk weights imposed by the bank regulator on loans, securities, and reserves are 100%, 50%, and, 0 % respectively. Calculate the capital adequacy ratio (bank capital/risk weighted assets) of the bank. C. Now suppose the Bank Regulator imposes a minimum capital adequacy ratio of 12.5%. How can the bank adjust its balance sheet to meet the regulation? List and discuss the possible options (no need to show the T-accounts; a descriptive answer would be enough). d. Now consider the case where the central bank adopts a reserve requirement ratio of 20% on deposits. Show how would the bank balance sheet look like if the bank uses its excess reserves and also borrows from the central bank to meet the minimum amount of reserve requirements. What if the reserve requirement ratio increases to 40%? Can the bank fulfill the reserve requirement quickly by just borrowing from the central bank? Why or why not