$\backslash$table$[[$Amounts in Millions USD$],[$Assets$,,,,$Liabilities,,$],[,,,,,,],[$Cash$,,$$$250,,,$Deposits,$$2,300$Problem Solving Exercises$$ Chapter $2$

$1$a$)$ Suppose in the sample balance sheet that depositors withdraw $$30$m which the bank pays from cash.

a$)$ What is the new reserve ratio?

b$)$ Is it below the required ratio?

c$)$ What types of things could the bank do to increase its reserve ratio?

$1$b$)$ Suppose the depositors$$ total withdrawal is uncertain but normally distributed with a mean of $$15$m and a standard deviation of $$5$m$.$

a$)$ Simulate this withdrawal with $1000$ scenarios

b$)$ What percent of the time is the bank below its minimum reserve requirement of $10\%?($Use a data table to calculate the percent$).$

$2$a$)$ Suppose in the sample balance sheet that, due to an economic downturn, the bank $$writes down$$ its mortgage loans by $$500$m$.$ This will reduce the value of the Home Mortgages and Owners Equity.

a$)$ What is the value of Owners Equity after the write$-$down?

b$)$ When an institution$$s equity becomes negative it is said to be Insolvent. What would the bank have to do to become solvent again?

$2$b$)$ Suppose the write$-$down is uncertain but normally distributed with a mean of $$25$m and a standard deviation of $$10$m$.$

a$)$ Simulate this write$-$down with $1000$ scenarios

b$)$ What percent of the time is the banks$$ Capital Ratio below the minimum required ratio of $6\%?$

Use a data table to calculate the percent.