Consider a bank with the following balance sheet: ? Assets Liabilities $11 $41 m

Question

Consider a bank with the following balance sheet: ? Assets Liabilities $11 $41 million Bank capital $70 million $135 million - $13 milliorn millionCheckable deposits Required reserves Excess reserves Loans Assume that required reserves are 8%. In order to avoid insolvency regulators decide to provide he bank with S28 million mortgages is featured in the local newspaper, causing a bank run. As a result, $30 million in deposits is withdrawn. bank capital. Ass·m hat ad news about Show the effects of the capital injection and bank run on the balance sheet. (Round your responses to the nearest whole number) Assets Liabilities Required reserves S million Checkable deposits $ million Excess reservesmillion Bank capital million Loans Smillion

Explanation / Answer

ans:

bank capital provied by regulators will cause the new bank capital to be increased to = -13 + 28 =$15

chekable deposits have gone down by $30 million , hence new checkable deposits = 135 - 30 = $105

required reserves is 8% of checkable deposits, hence, new required reserves = 105 * 0.08 = 8.4 ~ 8

while loan and excess reserves will remain unchanged at $70 and $41 respectively.

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