Question 3

a) Using the information provided, construct a balance sheet for The Sample Bank USA Bank. That is, properly list the assets, liabilities, and bank capital of The Sample Bank USA Bank in a T-Account format.

b) What is the reserve ratio for The Sample Bank USA Bank? If the reserve requirement is 15%, what is the excess reserves ratio for this bank?

c) If the reserve requirement is 15% and this bank is willing to have a 0% excess reserves ratio, how much deposit outflow from checking accounts can they sustain?

d) If the reserve requirement is 30% and this bank is willing to have a 0% excess reserves ratio, how much deposit inflow from saving deposits would they need?

e) Assume the Central Bank were to sell $100 of short-term securities to this bank. If the reserve requirement is 15% and this bank is willing to have a 0% excess reserves ratio, what action, if any, could the bank take to achieve comply with the reserve requirement (provide one example).

Question 4

a) Suppose interest rates in the economy fall from 4% to 1%, what will happen to The Sample Bank USA Banks profit? Show a calculation.

b) Calculate the average duration of assets and liabilities for The Sample Bank USA Bank.

c) Suppose interest rates fall in the economy from 4% to 1%, what will happen to The Sample Bank USA Banks capital relative to assets? Show a calculation.

d) Using the original balance sheet information, what is the leverage ratio for The Sample Bank USA Bank? Briefly explain whether they comply with regulations for the leverage ratio or not.

e) Using the original balance sheet information, if The Sample Bank USA Bank had $10 of profit, what is the banks ROA and ROE?

The following table provides balance sheet information for a bank. You will use this information for Question 3) and 4). The following table provides balance sheet information for a bank. You will use this information for Question 3) and 4)