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URGENT PLS Consider a bank with a sudden decline in the value of assets, such that it has the following balance sheet. Required reserves are
URGENT PLS
Consider a bank with a sudden decline in the value of assets, such that it has the following balance sheet. Required reserves are 8%. ASSETS LIABILITIES Required reserves 10.4Million Deposits 130million Excess Reserves 28.6Million Capital -16 million Loans 75 Million 1. To avoid insolvency, regulators decide to provide the bank with $25 million in the capital. What does the bank's balance sheet look like? [The $25 million in capital initially shows up on the asset side of the balance sheet as cash reserves]. 2. What is the bank's total level of reserves after the capital injection? How much of these reserves are required? How much is excess? 3. The bad news about the bank is featured in a local newspaper, causing a bank run. As a result, $30 million in deposits is withdrawn. 1. What is the level of total reserves after the bank run? 2. Show the effect on the bank's balance sheetStep by Step Solution
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