1) [10 marksl Credit Atlantic Bank has the following balance sheet: Reserves Can
ID: 1159017 • Letter: 1
Question
1) [10 marksl Credit Atlantic Bank has the following balance sheet: Reserves Canada Bonds Loans S20 S30 S80 Chequable deposits 120 Bank Capital $10 The bank's desired reserve ratio is 10 percent and there is a withdrawal of cash from chequable deposits equal to $20. Describe what is likely to happen in the bank's balance sheet and produce the new balance sheet for Credit Atlantic Bank. [Hint a bank manager will choose the option with the lowest transaction cost to meet the desired reserve requirement.]Explanation / Answer
Answer : Chequeable deposits has been reduced to $20.
New Balance sheet Credit Altantic Bank :
Required reserve = 0.10
New Chequeable Deposits = $120-$20 = $100
New reserve = 0.10*$100= $10
New Loan=$80 -$10 = $70
Reserve. $10 Chequeable deposits. $100 Canada Bonds. $30 Bank Capital. $10 Loans $70Related Questions
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