ll. Creation of Money: Q-1 Suppose that the T account for Sovereign Bank is as follows and the reserve requirements ratio is 20% ASSETS LIABILI11ES Cash Reserves $ 1 ,000 Demand De osits a) What is the size of the money multiplier? b) With the present required ratio how much total money banking system can create? 2. Given the balance sheet below and assuming a required reserve ratio of 20 percent, ho w much (in dollar terms) must the bank hold in required reserves? Assets Property $ 5 million Government bonds $10 million Vault cash $15 million Deposited in $20 million Federal Reserve accounts Loans $50 million TOTAL ASSETS $100 million Liabilities and Net Worth Demand deposits 35 80 million Net worth 3 20 million TOTAL LIABILITIE S PLUS NET WORTH $100 million 3. If the required reserve ratio is 0.2, and a bank has $100 million in demand deposits and $40 million in property and buildings, how much reserves it needs to hold