The following table provides balance sheet information for a bank. You will use this information for Question 3) and 4). Five Hundo Bank Duration Category Bank Capital Checkable Deposits Long-term CDs Long-term Loans Long-term Securities Money Market Deposit Accounts Reserves Saving Deposits Short-term Loans Short-term Securities Variable Rate CDs Variable Rate Loans $ Value $25 $200 $50 $150 $100 $125 $10 $75 $100 $100 $25 $40 2.5 5.5 20.0 15.0 0.5 0.0 7.5 2.0 0.5 0.8 8.0 3) a) b) d) Using the information provided, construct a balance sheet for Five Hundo Bank. That is, properly list the assets, liabilities, and bank capital of Five Hundo Bank in a T-Account format. What is the reserve ratio for Five Hundo Bank? If the reserve requirement is 10%, does this bank satisfy that requirement? Briefly explain Based on your answer to b) suppose this bank decided to buy or sell short-term securities to match the 10% requirement? Briefly explain how much short-term securities they would need to buy or sell to do that. Using the original balance sheet information, if the reserve requirement was 20% and this bank decided to meet that requirement by increasing their checkable deposits (i.e. they conduct a marketing campaign to get more people to sign up and deposit into checking accounts), how much checkable deposit inflow do they need? Show a calculation. Using the original balance sheet information, if the reserve requirement was 1%, how much deposit outflow from money market accounts could this bank sustain and still comply with that regulation? Show a calculation. e) The following table provides balance sheet information for a bank. You will use this information for Question 3) and 4). Five Hundo Bank Duration Category Bank Capital Checkable Deposits Long-term CDs Long-term Loans Long-term Securities Money Market Deposit Accounts Reserves Saving Deposits Short-term Loans Short-term Securities Variable Rate CDs Variable Rate Loans $ Value $25 $200 $50 $150 $100 $125 $10 $75 $100 $100 $25 $40 2.5 5.5 20.0 15.0 0.5 0.0 7.5 2.0 0.5 0.8 8.0 3) a) b) d) Using the information provided, construct a balance sheet for Five Hundo Bank. That is, properly list the assets, liabilities, and bank capital of Five Hundo Bank in a T-Account format. What is the reserve ratio for Five Hundo Bank? If the reserve requirement is 10%, does this bank satisfy that requirement? Briefly explain Based on your answer to b) suppose this bank decided to buy or sell short-term securities to match the 10% requirement? Briefly explain how much short-term securities they would need to buy or sell to do that. Using the original balance sheet information, if the reserve requirement was 20% and this bank decided to meet that requirement by increasing their checkable deposits (i.e. they conduct a marketing campaign to get more people to sign up and deposit into checking accounts), how much checkable deposit inflow do they need? Show a calculation. Using the original balance sheet information, if the reserve requirement was 1%, how much deposit outflow from money market accounts could this bank sustain and still comply with that regulation? Show a calculation. e)
