Section B: Conventional Questions (80 marks) Question 1 (23 marks) 1. a. State the equation that reflects a bank's balance sheet? I mark b. i ABC Bank commenced its operations with $120 million in capital. During the first week of operation, ABC Bank has received $2,000 million in saving deposits. Also, ABC Bank has issued $300 million commercial loans and $700 million mortgage loans. Show the T-account for ABC Bank if the required reserve ratio is 12%. 3 marks ii. On the first day of second week operations, ABC Bank invested $800 million in Treasury Bills issued by the U.S. Government. Show the T-account of ABC Bank after the purchase of the Treasury Bills. 2 marks iii. At the end of second week operations, customers decided to withdraw $200 million saving deposits from ABC Bank. Show the T-account for ABC Bank after the $200 million deposit outflow. Is there a problem created by the withdrawal? Explain your answers. 3 marks iv. Identify and explain four options that are available for ABC Bank to resolve the problem identified in b. iii. What are the costs associated with each of the options suggested? To illustrate your answers, you are required to show the T-account for each of the options suggested. 10 marks Explain why the U.S. banks are not permitted to own stocks. 4 marks