A bank has $260 million in total reserves, of which $11 million are excess reser
ID: 1119248 • Letter: A
Question
A bank has $260 million in total reserves, of which $11 million are excess reserves. The bank currently has $3.582 billion in loans, $0.918 billion in securities, and $136 million in other assets. The required reserve ratio for transactions deposits is 11 percent.
Calculate the sum of this bank's total amount of liabilities and net worth $___ billion
Calculate the additional amount of loans this bank can make to households and firms. $___ million
Calculate the current quantity of transactions deposits at this bank. $___ bilion
Explanation / Answer
Total Reserve = $260 Million
Excess Reserve = $11 Million
Required reserve = 260-11 = $249 Million
Loans = $3.582 Billion or $3582 Million
Securities = $918 Million
Other Asset = $136 million
A.
Total asset = Total reserve + loans + securities + other assets = 260+3582+918+136
Total asset = $4896 Million
Now, total assets will be equal to the sum of liabilities and net worth.
Hence, the sum of liabilities and net worth is $4896 Million or $4.896 Billion.
B.
Excess Reserve = $11 Million
Hence,
Additional amount of loan = Excess Reserve/ Required reserve ratio = 11/11%
Additional amount of loan = $100 million or $.1 Billion
C.
Total Reserve = $260 Million
Excess Reserve = $11 Million
Required reserve = 260-11 = $249 Million
Transaction deposits = Required reserve / Required reserve ratio = 249/11%
Transaction deposits = $2263.64 Million or 2.26364 Billion
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