Answer the following parts (i) and (ii).

(i) A commercial bank has the following balance sheet below. The reserve requirement is 8% and this bank is trying to meet exactly the minimum reserve requirement by selling off its loans. Reflecting this change, calculate and show the new balance sheet for this bank.

(ii) Explain in detail what is (i) Regulatory Capital and (ii) Economic Capital, and compare them.

 

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Assets Reserves Loans Securities Assets Required reserves Excess reserves T-bills $0 $90 million $10 million Mortgages Commercial loans (ii) Calculate the risk-weighted assets considering a bank with the following balance sheet. Show all your work. [15%] $12 million $10 million Liabilities Deposits Bank capital $80 million $90 million $20 million $90 million $10 million Liabilities Checkable deposits Savings deposits Bank capital $120 million $ 80 million $12 million Assets Reserves Loans Securities Assets Required reserves Excess reserves T-bills $0 $90 million $10 million Mortgages Commercial loans (ii) Calculate the risk-weighted assets considering a bank with the following balance sheet. Show all your work. [15%] $12 million $10 million Liabilities Deposits Bank capital $80 million $90 million $20 million $90 million $10 million Liabilities Checkable deposits Savings deposits Bank capital $120 million $ 80 million $12 million

Answer rating: 100% (QA)

i Assets Reserves 0 Loans 72million Securities 10million Liabilities Deposits 90million Bank capital ... View the full answer