Hi

Kindly,help me in following question.

Question 2

a)You are considering entering a reverse repurchase agreement or purchasing commercial paper for short-term investment. Identify and explain your choice of investment given their maturities and returns are the same.

b)The following table shows the balance sheet of the XYZ Bank (in billion):

Reserve Deposits

$200 $800

Loan

$600

The bank does not hold excess reserve and no cash is held by public.

(i)Calculate required reserve ratio.

(ii)The central bank purchases $30 billion bonds from the public, and then 70% of the cash are deposited into banking system by the public. XYZ Bank converts all excess reserves to loans and the borrowers eventually deposit all of the borrowed funds to

XYZ Bank. Calculate the new amount of deposit in XYZ Bank.

Looking for your kind help.Thank you.