If the capital requirement is 8% of risk-adjusted assets, what is the minimum capital that each...
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If the capital requirement is 8% of risk-adjusted assets, what is the minimum capital that each bank needs to maintain the current balance sheet? (1 points) D. If the capital requirement is 8% of risk-adjusted assets, what is the maximum loss in commercial loans that each bank can absorb before having to change their asset holdings or funding? (2 points) E. If the banks expect significant increases in their funding costs (e.g. higher interests on deposits, higher interests on CDs, etc.), what should they do to manage this risk? (No calculation needed) (2 points) Risk-Adiusted Assets Weight Bank Assets (% Reserves (% Treasury securities 20% Agency securities 50% Municipal bonds 50% Residential mortgages 100% Real estate loans Commercial loans 100% 100% Fixed assets 100% Letters of credit 5. Assets Reserves 5-year Treasury bonds Agency Securities Commercial loans Reserves Assets 5-year Treasury bonds Real estate loans Commercial loans $3 m $2 m $50 m $50 m $3 m $4 m $45 m $55 m Second National Bank Bank capital A. Calculate the banks' reserve ratio. Checkable deposits Certificates of deposit First National Bank Liabilities Bank capital Checkable deposits Other Borrowings Liabilities $20 m $75 m $10 m $22 m $75 m $10 m Use the above balance sheets to answer the following questions. The questions are unrelated to each other. (1 points) B. Assume that the required reserve is 10%, if each bank receives additional $5 m new deposits, what is the maximum amount of 5-year Treasury bonds that each bank can hold on its balance sheet without changing other asset holdings? (2 points) If the capital requirement is 8% of risk-adjusted assets, what is the minimum capital that each bank needs to maintain the current balance sheet? (1 points) D. If the capital requirement is 8% of risk-adjusted assets, what is the maximum loss in commercial loans that each bank can absorb before having to change their asset holdings or funding? (2 points) E. If the banks expect significant increases in their funding costs (e.g. higher interests on deposits, higher interests on CDs, etc.), what should they do to manage this risk? (No calculation needed) (2 points) Risk-Adiusted Assets Weight Bank Assets (% Reserves (% Treasury securities 20% Agency securities 50% Municipal bonds 50% Residential mortgages 100% Real estate loans Commercial loans 100% 100% Fixed assets 100% Letters of credit 5. Assets Reserves 5-year Treasury bonds Agency Securities Commercial loans Reserves Assets 5-year Treasury bonds Real estate loans Commercial loans $3 m $2 m $50 m $50 m $3 m $4 m $45 m $55 m Second National Bank Bank capital A. Calculate the banks' reserve ratio. Checkable deposits Certificates of deposit First National Bank Liabilities Bank capital Checkable deposits Other Borrowings Liabilities $20 m $75 m $10 m $22 m $75 m $10 m Use the above balance sheets to answer the following questions. The questions are unrelated to each other. (1 points) B. Assume that the required reserve is 10%, if each bank receives additional $5 m new deposits, what is the maximum amount of 5-year Treasury bonds that each bank can hold on its balance sheet without changing other asset holdings? (2 points)
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Horngrens Financial and Managerial Accounting
ISBN: 978-0133866292
5th edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura
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