Ka) (i) It is day one at Peake Bank, which has opened with $25 million in capital. A total of $250 million in checkable deposits are received from eager depositors. On day one, Peake Bank makes a $75 million commercial loan and another $125 million in residential mortgages with the following terms: 250 standard, 30-year, fixed-rate mortgages (monthly payments) with a 4.35% nominal annual rate. On the first day, each mortgage is valued at $500,000. Assume that required reserves set by the Fed are 8% What does Peake Bank's balance sheet look like on its first day? Please fill in the table below. How well capitalized is Peake Bank? (aii) Early the next day (day two), Peake Bank invests $25 million of its excess reserves in commercial loans. Later, in the day, really bad news hits the U.S. mortgage markets. It would be fair to describe it as an interest rate shock. Mortgage rates jump to 8.5% annual rate. This now implies a present value of Peake's current mortgage holdings of $323,711 per mortgage. Bank regulators now force Peake Bank to sell its mortgages. This is to recognize the fair market value of the bank's mortgages. What does Peake Bank's balance sheet now look like? How is Peake Bank's capital position impacted by these events? Ka) (i) It is day one at Peake Bank, which has opened with $25 million in capital. A total of $250 million in checkable deposits are received from eager depositors. On day one, Peake Bank makes a $75 million commercial loan and another $125 million in residential mortgages with the following terms: 250 standard, 30-year, fixed-rate mortgages (monthly payments) with a 4.35% nominal annual rate. On the first day, each mortgage is valued at $500,000. Assume that required reserves set by the Fed are 8% What does Peake Bank's balance sheet look like on its first day? Please fill in the table below. How well capitalized is Peake Bank? (aii) Early the next day (day two), Peake Bank invests $25 million of its excess reserves in commercial loans. Later, in the day, really bad news hits the U.S. mortgage markets. It would be fair to describe it as an interest rate shock. Mortgage rates jump to 8.5% annual rate. This now implies a present value of Peake's current mortgage holdings of $323,711 per mortgage. Bank regulators now force Peake Bank to sell its mortgages. This is to recognize the fair market value of the bank's mortgages. What does Peake Bank's balance sheet now look like? How is Peake Bank's capital position impacted by these events
