The following information belongs to Banks A & B: Bank A: Reserves Deposits Loans Bank Capital...

 

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The following information belongs to Banks A & B: Bank A: Reserves Deposits Loans Bank Capital Securities Bank B: Reserves Deposits Bank Capital Loans Securities 10 100 90 10 10 14 110 4 90 10 a. List the above items in a T account b. Assume the desired reserve is 10%. Calculate the desired and the excess reserve, if any, for both banks. c. A client withdrew 10 million from Bank B. Show the changes in the T account of Bank B. If there is a reserve deficiency what would the bank do? d. Suppose that each Bank made a $5 million loan to Power Investments Incorporated. Power Investments uses its loans to undertake a risky project, goes bankrupt and defaults on its loans. How will this affect each of the two banks? Show your work e. What types of government regulations might have prevented these outcomes in "d"? f. What types of actions by the banks might have prevented these outcomes in "d"? The following information belongs to Banks A & B: Bank A: Reserves Deposits Loans Bank Capital Securities Bank B: Reserves Deposits Bank Capital Loans Securities 10 100 90 10 10 14 110 4 90 10 a. List the above items in a T account b. Assume the desired reserve is 10%. Calculate the desired and the excess reserve, if any, for both banks. c. A client withdrew 10 million from Bank B. Show the changes in the T account of Bank B. If there is a reserve deficiency what would the bank do? d. Suppose that each Bank made a $5 million loan to Power Investments Incorporated. Power Investments uses its loans to undertake a risky project, goes bankrupt and defaults on its loans. How will this affect each of the two banks? Show your work e. What types of government regulations might have prevented these outcomes in "d"? f. What types of actions by the banks might have prevented these outcomes in "d"?

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The detailed answer for the above question is provided below a Bank A Reserves Debit 10 Credit 0 Deposits Debit 0 Credit 100 Loans Debit 90 Credit 0 B... View the full answer