Instructions: For the following question, write answers in the space provided. Answers must be hand-written. Upload either a jpeg or pdf file to the assignment folder prior to the deadline.

College Bank's Balance Sheet (Dec. 31st):

Assets Liabilities

Cash $4,000 Deposits $100,000

Deposits at the

Bank of Canada. 6,000 Capital --1,000

Mortgages & Loans 91,000 $101 000

$101 000

Refer to table above showing College Bank's balance sheet. Assume College Bank is operating at its target reserve ratio (v) and has no excess reserves, and that all commercial banks have the same target reserve ratio.

a) Calculate College Bank's reserve ratio.

b) If a 'new deposit' to the Canadian banking system of $3,000 is deposited at College Bank, calculate the maximum new loan that College Bank could make.

c) Calculate the eventual total new deposits created in the banking system as a result of this new deposit.

i. Assuming there is no cash drain

ii. Assuming individuals hold cash equal to 10 percent of their bank deposits