Consider the balance sheets of Bank A and Bank B. Bank A is in Milan, Bank B is in New York. The current exchange rate is €1.00 = $1.25. Show the correct balances in each account if a currency trader employed at Bank A buys €100,000 from a currency trader at Bank B for $125,000 using its correspondent relationship with Bank B.

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€ deposit at B $ deposit at B Cash in the vault Other Assets Total Assets @ €1.00 = $1.25 Eurodollar deposit at A € deposit at A Cash in the vault Other Assets Total Assets @ €1.00 = $1.25 Assets OLD €500 $800 €200 €400 Assets OLD €900 $220 €200 €600 NEW €200 €400 ======= NEW €200 €600 Bank A (Milan) 000s B's Eurodollar deposit B's € deposit Other Liabilities Owners Equity Total Liabilities & Equity @ €1.00 = $1.25 Bank B (NYC) 000s A's euro deposit A's $ deposit Other Liabilities Owners Equity Total Liabilities & Equity @ €1.00 = $1.25 Liabilities and Equity OLD $900 €220 €300 €500 Liabilities and Equity OLD $500 €800 €200 €350 NEW €300 €500 NEW €200 €350 € deposit at B $ deposit at B Cash in the vault Other Assets Total Assets @ €1.00 = $1.25 Eurodollar deposit at A € deposit at A Cash in the vault Other Assets Total Assets @ €1.00 = $1.25 Assets OLD €500 $800 €200 €400 Assets OLD €900 $220 €200 €600 NEW €200 €400 ======= NEW €200 €600 Bank A (Milan) 000s B's Eurodollar deposit B's € deposit Other Liabilities Owners Equity Total Liabilities & Equity @ €1.00 = $1.25 Bank B (NYC) 000s A's euro deposit A's $ deposit Other Liabilities Owners Equity Total Liabilities & Equity @ €1.00 = $1.25 Liabilities and Equity OLD $900 €220 €300 €500 Liabilities and Equity OLD $500 €800 €200 €350 NEW €300 €500 NEW €200 €350