Balance sheet of the Summer Bank Assets Liabilities Cash $ 15,000 Loans $ 185,00
ID: 1110093 • Letter: B
Question
Balance sheet of the Summer Bank
Assets
Liabilities
Cash $ 15,000
Loans $ 185,000
Deposits $ 120,000
Capital $ 80,000
Total $ 200,000
Total $ 200,000
The required reserve ratio on all deposits is 12%
a. What, if any, are this bank's excess reserves?
b. How much new amount of loan will this bank be able to create because of the excess reserves?
c. Answer part a and b if the required reserve ratio is changed to 8%.
Assets
Liabilities
Cash $ 15,000
Loans $ 185,000
Deposits $ 120,000
Capital $ 80,000
Total $ 200,000
Total $ 200,000
Explanation / Answer
Answer
a)
the required reserves=deposits*required reserve ratio
=120000*0.12
=14400
Excess reserve=cash -required reserves
=15000-14400=600
b)
the bank can make the loan of $600, the excess reserve.
c)
the excess reserve=15000-120000*0.08
=5400
the bank loan out $5400
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