Question
The table below shows the balance sheet for a hypothetical commercial bank (Vancouver Bank). Assume that the Vancouver Bank has achieved its target reserve ratio.
The table below shows the balance sheet for a hypothetical commercial bank (Vancouver Bank). Assume that the Vancouver Bank has achieved its target reserve ratio.
Balance Sheet:Vancouver Bank
Assets
Liabilities
Reserves
$ 200
Deposits
$ 4000
Loans
$ 4200
Capital
$ 400
a.What is the Vancouver Bank's target reserve ratio?
b.What is the value of the owners' investment in the bank?
c.Suppose someone makes a new deposit to the Vancouver Bank of $100. Draw a new balance sheet showing the immediate effect of the new deposit. What is the Vancouver Bank's new reserve ratio?
- Suppose instead that someone withdraws $100 cash from the Vancouver Bank. Show the new balance sheet and the new reserve ratio
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Intermediate Accounting
Authors: kieso, weygandt and warfield.
14th Edition
9780470587232, 470587288, 470587237, 978-0470587287
