4. a) For the balance sheet below, find the level of equity and the level of...

 

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4. a) For the balance sheet below, find the level of equity and the level of excess reserves. Assume that the required reserve ratio is 10%. Reserves $50 Bonds $400 Loans $600 Excess Reserves = 20 Equity = 250 Assets Reserves $ Bonds $ Loans $600 b) Now assume there is a deposit outflow of $100 and the bank sells the minimum amount of bonds to meet the reserve requirement, show the new balance sheet. If you need to add a line item to either side you can do that. Just make sure that in the end, your balance sheet balances. Reserves $ Bonds $400 Loans $600 Assets Liabilities Transaction Deposits $300 $500 CDs Equity Assets Transaction Deposits $ $500 CDs Equity Liabilities c) Go back to the balance sheet in a). This time, when there is a deposit outflow of $100, the bank borrows to meet the reserve requirement. Show the new values on the balance sheet below. If you need to add a line item to either side you can do that. Just make sure that in the end, your balance sheet balances. __$ CDs Equity Liabilities Transaction Deposits $ $500 __$ 4. a) For the balance sheet below, find the level of equity and the level of excess reserves. Assume that the required reserve ratio is 10%. Reserves $50 Bonds $400 Loans $600 Excess Reserves = 20 Equity = 250 Assets Reserves $ Bonds $ Loans $600 b) Now assume there is a deposit outflow of $100 and the bank sells the minimum amount of bonds to meet the reserve requirement, show the new balance sheet. If you need to add a line item to either side you can do that. Just make sure that in the end, your balance sheet balances. Reserves $ Bonds $400 Loans $600 Assets Liabilities Transaction Deposits $300 $500 CDs Equity Assets Transaction Deposits $ $500 CDs Equity Liabilities c) Go back to the balance sheet in a). This time, when there is a deposit outflow of $100, the bank borrows to meet the reserve requirement. Show the new values on the balance sheet below. If you need to add a line item to either side you can do that. Just make sure that in the end, your balance sheet balances. __$ CDs Equity Liabilities Transaction Deposits $ $500 __$

Answer rating: 100% (QA)

Heres how to solve the problems Part a Equity 250 Excess reserves 20 Explanation To find the equity ... View the full answer