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Examine the following balance sheet of a bank that suffers from a shortfall in reserves. The manager tries to manage liquidity. Given the required reserve
Examine the following balance sheet of a bank that suffers from a shortfall in reserves. The manager tries to manage liquidity. Given the required reserve ratio is 10%, answer the questions that follow.
ASSETS LIABILITIES
Reserves 40 Checkable Deposits 300
Securities 80 Bank Capital ??
Loans 260
- The bank will be in the trouble with the central bank. Why?
- Write down the new balance sheet, when the management solves the problem by borrowing from other banks.
- Write down the new balance sheet, when the management solves the problem by calling loans.
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