Table 1 shows the financial position of the Smithville Bank once $3371.00 has be
ID: 1119797 • Letter: T
Question
Table 1 shows the financial position of the Smithville Bank once $3371.00 has been deposited. Assume that the required reserve ratio is 9.00%. Table 1. Original Assets and Liabilities The bank manager decides to lend Billy Bob Smith allAssets of the bank's excess reserves. Billy Bob takes the funds to Eula Mae's Used Machines and buys a Liabilities Reserves: $3371.00 Deposits: $3371.00 pickup truck. Eula Mae then deposits the money in her account back at the Smithville Bank. Table 2. Assets and Liabilities After Bank Makes a Loa Assets Reserves:Deposits:? Loans: Table 2 should show the bank's accounts after the loan is made and the funds again deposited. Liabilities 1. What are the bank's loans in Table 2? Number $ 3067.61 2. What are the bank's reserves in Table 2? Incorrect The bank's reserves are the sum of the 9.00% of the initial $3371.00 deposited and 100% of the $306761 loaned out deposited in Eula Mae's account. Number $ 303.39 3. What are the bank's deposits in Table 2? Number $3371Explanation / Answer
1) The banks loans in table 2 = $3067.61
banks loans = 3371 - (3371 *9%) = 3371 -303.39 = 3067.61
2) The banks reserves in table 2 = $3371
bank reserves = 303.39+3067.61= 3371
3) THe bank deposits in table 2 - = $3067.61
The bank deposits it the same amount that it was lend .
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