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25 May 2019

Consider a bank with the following income statement: It has $100 in loans with an interest rate of 5 percent; $50 in security holdings, paying 10 percent; reserves of $10; $100 in savings accounts that earn an interest rate of 2.5 percent; checking deposits equal to $30, a net worth of $30, and other expenses of $15. Find bank profit, the return on equity, and return on assets.

a. What is the total income

b. What is the total expenses

c. What is the bank

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Jamar FerryLv2

27 May 2019

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Related questions

1. Bank of Beacon Hill has total reserves of $40 million and current total checking account deposits of $200 million. With a legal reserve requirement of 10% of total checking accounts, what are the bank's legal reserves and excess reserves? If the bank creates a new loan in the form of a new checking account equal to its excess reserves and each check is deposited in another commercial bank, what can the banking system do in total maximum new checking accounts (loans), given the simple bank deposit multiplier?

2. If banks desire to retain excess reserves of 10% of total checking accounts and borrowers hold 10% of their new checking accounts (loans) for liquidity purposes and do not spend that 10%, what will be the maximum impact on the money supply in the form of new checking accounts?

pinkyellowjacket648

APPLICATION

Suppose that the reserve requirement is 10% on all deposits and the balance sheet of Peopleâs National Bank looks like the following (in billions):

Assets

Vault Cash $555

Reserves at the Fed $545

Loans Outstanding $657

Securities $1100

Buildings & Equipment $1400

Other Assets $2115

Liabilities

Demand Deposits $545

Savings Deposits $7245

Time Deposits $2210

Other Liabilities $785

Net Worth ??

What is the âNet Worthâ of the bank?

2. What is the dollar value of required reserves for Peopleâs National Bank?

3. Does the bank have any excess reserves?

4. What is the maximum amount of new loans the bank can extend?

5. Indicate how the bankâs balance sheet would be altered if it made these new loans.

6. Suppose that the required reserves were 20 percent; if this were the case, would the bank be in a position to extend any additional loans? Would it satisfy the reserve requirement?

2. Imaging the FED engages in an open market sale of $25 million; using a balance sheet for both the bank and the FED, illustrate the changes.

3. If an individual moves $500 from their checking to their savings, how will this affect M), M1, M2, and M3? What about moving funds from savings to checking?

jadeant83

For the next six questions, consider an economy with only two non-identical banks, called Bank One and Bank Two. In addition to this information, members of the public in this economy hold $6000 in cash, and there are no travelers' checks.

Partial balance sheet information for each bank is given below:

Bank One

Cash in bank $3500

Equity (net worth) $2150

US government bonds $1650

Total savings deposits $14,000

Deposit in the Federal Reserve $5000

Total checking deposits $54,000

Bank Two: US government bonds $950

Total checking deposits $46,000

Cash in bank $2000

Deposit in the Fed $4000