Question: Question 8 ( 6 marks, each question is worth 1 mark) The below table shows balance sheet for a chartered bank. Assume that the bank

Question 8 (6 marks, each question is worth 1 mark)

The below table shows balance sheet for a chartered bank. Assume that the bank has achieved its target reserve ratio.

Balance Sheet: Regal Bank

Assets Liabilities

Reserves $1250 Deposits $7160

Loans $6700 Capital (Net Worth) $ 790

8.1 Calculate the bank’s target reserve ratio.

8.2 Calculate the value of the owners’ investment in the bank.

8.3 Given your answer in [8.1] and assuming zero cash drain, compute the deposit multiplier

8.4 Given your answer in [8.1], suppose that 3.7 percent of the new reserves are held in the form of currencies, calculate the money multiplier.

8.5 Given your answer in [8.1] calculate the amount of excess reserves.

8.6 Assuming a new deposit in the bank has been made in the amount of $1,040. Write the new balance sheet showing the immediate effect of the new deposit. Calculate the bank’s new target reserve ratio.

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