Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Keele Bank has the following items on its balance sheet (expressed in $billion). ESF 2 Accumulated retained profit 54 Term Deposits of customers 630 Loans

Keele Bank has the following items on its balance sheet (expressed in $billion).

ESF

2

Accumulated retained profit

54

Term Deposits of customers

630

Loans to households

500

Capital notes on issue

4

Demand deposits of customers

128

Shares on issue

16

Provisions for bad and doubtful debt

10

Loans to businesses

300

Capital Reserve

10

Government securities (trading)

30

Government securities (available for sale)

20

(a) Build Keele Banks balance sheet incorporating all the above items and calculate Keele Banks equity.

(5 marks)

(b) Using one new balance sheet (separate from the one in a), represent the effect of the following operations on the balance sheet of the bank described in question (a). [Only represent variations, not new levels. ]

(i) The market value of the government bonds held by Keele Bank for trading purposes increases by $3 billion.

(ii) The market value of the government bonds held by Keele Bank for liquidity purposes increases by $2 billion.

(iii) Keele Bank writes off $15 billion of loans made to households.

(iv) Keele Bank makes $1 billion new loans to businesses that have an account in the bank.

(v) Keele Bank buys new furniture for $0.2 billion from a company that is not a customer of the bank.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Clever Girl Finance Learn How Investing Works Grow Your Money

Authors: Bola Sokunbi

1st Edition

1119696739, 978-1119696735

More Books

Students also viewed these Finance questions