Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The average daily net transaction accounts deposit balance of CCNB bank during the most recent reserve computation period is $650 million. The amount of average

The average daily net transaction accounts deposit balance of CCNB bank during the most recent reserve computation period is $650 million. The amount of average daily reserves at the Fed during the reserve maintenance period is $50 million and the average daily vault cash corresponding to the maintenance period is $10 million. Assume the minimum cash reserve requirement against the net transaction accounts are: Net transaction accounts (million) Reserve requirement (%) < $32 0 32- 250 3 > 250 10 If overshooting, a maximum of 4 percent of the gross required reserves can be carried over to the next maintenance period. If undershooting by more than 4%, a penalty equal to the central banks discount rate plus 2% is applied. Required:

a. What is the average daily reserve balance required to be held by the bank during the maintenance period?

b. Is the bank in compliance with the reserve requirements and how much fund can be carried over to next period or penalized?

c. If the bank has an opportunity cost of 7 percent and deposits at the Central Bank pay 3 percent, what is the effect on the income statement from this reserve period?

d. If the bank had transferred $40 million of its deposits every Friday over the two-week computation period to one of its offshore facilities, what would be the revised average daily reserve requirement?

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

Financial Statements A Step By Step Guide To Understanding And Creating Financial Reports

Authors: Thomas Ittelson

1st Edition

1632652072, 978-1632652072

More Books

Students also viewed these Finance questions

Question

What fraction of a sample is left after exactly 6 half-lives?

Answered: 1 week ago

Question

Differentiate 3sin(9x+2x)

Answered: 1 week ago

Question

Compute the derivative f(x)=(x-a)(x-b)

Answered: 1 week ago

Question

state what is meant by the term performance management

Answered: 1 week ago