The First National Bank (FNB) balance sheet is as follows (numbers in millions of $): Assets...

 

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The First National Bank (FNB) balance sheet is as follows (numbers in millions of $): Assets 1 Liabilities Cash 50 T-bills 185 Loans 265 500 1 a) (6 points) Suppose a 20% reserve requirement is imposed by the Central Bank. Are the reserves of FNB enough to meet the Central Bank's requirement? If yes, show why. If not, suggest a possible trade. Deposits 270 Euro CDs 140 Capital 90 500 b) (4 points) Compute the financing gap of FNB. c) (5 points) Suppose that FNB receives deposits from clients for $100 million. After receiving them, it invests $70 million in T-bills. Show the resulting balance sheet. d) (7 points) Ignore point c), i.e. FNB's balance sheet is still the initial one: 1 Liabilities Assets Cash 50 T-bills 185 Loans 265 500 Deposits Euro CDs Capital 270 140 90 500 Due to a sudden deterioration in economic conditions, you realize that $150million loans are indeed worth only $90 million. You decide to get rid of these non-performing loans by forming a Bad Bank, and retain the proceeds of the sale as cash. Show the Good Bank balance sheet after the loan sale. The First National Bank (FNB) balance sheet is as follows (numbers in millions of $): Assets 1 Liabilities Cash 50 T-bills 185 Loans 265 500 1 a) (6 points) Suppose a 20% reserve requirement is imposed by the Central Bank. Are the reserves of FNB enough to meet the Central Bank's requirement? If yes, show why. If not, suggest a possible trade. Deposits 270 Euro CDs 140 Capital 90 500 b) (4 points) Compute the financing gap of FNB. c) (5 points) Suppose that FNB receives deposits from clients for $100 million. After receiving them, it invests $70 million in T-bills. Show the resulting balance sheet. d) (7 points) Ignore point c), i.e. FNB's balance sheet is still the initial one: 1 Liabilities Assets Cash 50 T-bills 185 Loans 265 500 Deposits Euro CDs Capital 270 140 90 500 Due to a sudden deterioration in economic conditions, you realize that $150million loans are indeed worth only $90 million. You decide to get rid of these non-performing loans by forming a Bad Bank, and retain the proceeds of the sale as cash. Show the Good Bank balance sheet after the loan sale.

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