The required reserve ratio in this economy is%. (Enter your response as an integer.)If the total money stock (supply) is $200,000, the total amount of reserves held in the banking system is $ . (Enter your response as an integer.)The Sylvania Central Bank decides that it wants to cut the money stock in half. It is considering an open market operation.With commercial banks holding 10 percent of their checking deposits as excess reserves and the required reserve ratio equal to the value computed above, the Central Bank shouldV bonds worth $. (Enter your responseas an integer.) Challenge Problem. Assume that the public in the small country of Sylvania does not hold any cash. Commercial banks, however, hold 10 percent of their checking deposits as excess reserves, regardless of the interest rate. Inthe questions that follow, the "money multiplier" is given by 1/ (RR+ ER),whereRR = the percentage of deposits that banks are required to keep as reservesER = the percentage of deposits that banks voluntarily hold as excess reservesConsider the balance sheet of one of several identical banksAssetsLiabilities and Net WorthReserves600Checking Deposits2,400Loans1,800Net WorthTotal Assets2,400Liabilities and Net Worth2,400

Calucalting Excess reserves Money Multiplier (MM) & Monetary Base(MB)

The required reserve ratio in this economy is %. (Enter your response as an integer.) If the total money stock (supply) is $200,000, the total amount of reserves held in the banking system is S (Enter your response as an integer.) The Sylvania Central Bank decides that it wants to cut the money stock in half. It is considering an open market operation. With commercial banks holding 10 percent of their checking deposits as excess reserves and the required reserve ratio equal to the value computed above, the Central Bank should as an integer.) V bonds worth $. (Enter your response

The required reserve ratio in this economy is %. (Enter your response as an integer.) If the total money stock (supply) is $200,000, the total amount of reserves held in the banking system is S (Enter your response as an integer.) The Sylvania Central Bank decides that it wants to cut the money stock in half. It is considering an open market operation. With commercial banks holding 10 percent of their checking deposits as excess reserves and the required reserve ratio equal to the value computed above, the Central Bank should as an integer.) V bonds worth $. (Enter your response

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Assume that banks holds no excess reserves and the public holds no currency: A. If a bank receives a deposit inflow of $100,000 explain (using t-accounts) what happens to this bank and one additional round in the deposit creation process assuming the reserve requirement is 8%. B. How much do deposits and loans change for the banking system when the process is completed? Show computation and the entire banking system's final T-account. C. Suppose the Central Bank sells $5 billion to ABC Bank. Determine what happens to checkable deposits of the entire banking system after the sale and completion of the multiple deposit creation process. Determine the change in checkable deposit in the banking system and show the T-account of the banking system.
Assume that Bank M is the only commercial bank in the country with zero excess reserve and its legal cash requirement is 12%. Suppose that a customer, Mr. S, deposits RM5000 in the Bank M. a) Construct a balance sheet for Bank M b) Calculate the total deposits. c) Calculate the total reserves d) Calculate the total loans created
Q2) Suppose $150 of currency is in circulation. What is the banks’ impact on money supply?Calculate the money supply in case of Fractional reserve banking system. Pretend the Reserve Ratio is by 2.5%. 1. Borrowers first withdrew the loan from 1st National Bank and deposited it in 2nd National Bank. 2. Borrowers Took The Loan from 2nd National Bank and Deposited it in 3rd National Bank 3. Then Borrowers withdrew finally the loan from 3rd National Bank and deposited it in 4th National Bank. Questions: A. Open a T Account for each Bank with the previous situations. B. Show the Impact on money supply (How much the $150 of reserves had generated?)
Consider the simple Financial Intermediary (FI) balance sheet as shown below (in millions of dollars). Before the withdrawal Cash Assets Corporate Loans Total Amount $30 $170 $200 Liabilities/Equity Amount Deposits Equity Total $170 $30 $200 Suppose that depositors unexpectedly withdraw $70 million in deposits and the FI receives no new deposits to replace them. Assume that the FI cannot borrow any more funds in the short-term money markets, and because it cannot wait to get better prices for its assets in the future (as it needs the cash now to meet immediate depositor withdrawals), the FI has to sell any nonliquid assets (corporate loans) at 75 cents on the dollar. What will be the equity (in millions of dollars) of the FI after adjustments are made for the $70 million of deposit withdrawals? Assume no minimum cash reserve requirements.
2. Initially, the amount of currency was 500 and the amount of deposits was zero. The required reserve ratio is 10%. Answer questions below. 2.b. The public deposited all of 500 into a bank. This started the money creation process. 2.b.i. Choose correct words about the process. "The process stops when all of new deposited currencies are (used as reserves / loaned out)." 2.b.ii. Compared to before the public deposited the currencies, how much would be the increase in deposits? 2.b.iii. Compared to before the public deposited the currencies, how much would be the increase in money supply?
If, after a deposit outflow, a bank has a reserve deficiency of $ 3 million, it can meet its reserve requirements by: (more than one answer, NO partial credit). Question 3 options: repay $3 million of its discount loans from the Fed. selling $3 million of securities. reducing its capital by $3 million. decreasing loans by $3 million. reducing deposits by $3 million.
1. Rank the following types of bank liabilities, first according to their level of liquidity risk, and then according to their interest rate risk. Then rank them according to their current cost to the bank. Explain why the rankings vary. DDAs Interest-checking accounts MMDAs Small-time deposits Jumbo CDs Federal funds purchased Eurodollar liabilities Federal Home Loan Bank advances
Consider a failing bank. If the FDIC uses the payoff method a deposit of $330,000 is worth a minimum of $enter your response here. (Round your response to the nearest whole number.)
. Consider a failing bank. How much is a deposit of$290,000 worth to the depositor. if the FDIC uses thepayoff method? The purchase-and-assumption method?Which method is more costly to taxpayers?
2. Mean Green Bank started its first day of operations with $10 million in capital. $100 million in checkable deposits is received. The bank issues a $30 million commercial loan and another $30 million in mortgages. The required reserves are 8%.
Suppose ABC Bank has the following balance sheet items: checkable deposit received of $525 million, bank capital of $100 million, mortgage loans made of $500 million, and securities purchased of $50 million. Does ABC Bank still meet its reserve requirement? Why or why not? If not, what options are available to the bank to keep it from failing?
Imagine that the banking system's balance sheet can be represented by the following t-account: Assets LIABILITIES AND NET WORTH RESERVES 200 DEPOSITS 2000 BONDS 800 LOANS 1000 NETWORTH 0 TOTAL 2000 TOTAL 2000 Assuming the bank is "loaned up" the required reserve ratio is ___________ (round to two decimal places) The money multiplier is ___________ Imagine that the central bank uses open market operations to buy $300 worth of bonds from the bank above. Fill in the following t-account assuming that the money multiplier has taken its full effect: ASSETS LIABILITIES AND NET WORTH RESERVES __?___ DEPOSITS ___?__ BONDS ____?___ LOANS ____?____ NET WORTH ___?___ TOTAL _____?______ TOTAL ___?___

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