Suppose that Bank of Najah has the following info: Checkable deposits $500 million. Borrowed funds from the
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Suppose that Bank of Najah has the following info:
Checkable deposits $500 million.
Borrowed funds from the Central Bank $20 million.
Reserves $115 million.
Commercial loans $210 million.
Mortgage loans $120 million.
Consumer loans $65 million
Government Securities $35 million.
Assuming that the required reserves ratio is 12%
- Write down the bank’s balance sheet.
- Calculate its capital asset ratio. Comment on the result.
- Does the bank meet Basel requirements?
- The bank is considering buying Government securities, how much could it buy given the state of the balance sheet?
- Suppose the bank sells half the amount of its Gov. securities to the Central bank for $18 million, and made a new consumer loan of $5 million:
- Show what happens to the bank’s balance sheet.
- Show what happens to the bank’s capital.
- In the simple model what would happen to the money supply.
Related Book For
Money, Banking, and the Financial System
ISBN: 978-0134524061
3rd edition
Authors: R. Glenn Hubbard, Anthony Patrick O'Brien
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