21. (12 points) Below is a modified balance sheet of the The Peoples Bank of Gam

Question

21. (12 points) Below is a modified balance sheet of the The Peoples Bank of Gambier, small bank in Ohio The Peoples Bank thousands of dollars Assets Reserves Loans Liabilities + Capital $3,120 Checkable Deposits $16,100 Savings deposits$32,100 Short-term loans to businesses Consumer loans Real Estate Loans $2,700 $3,020 Borrowing $2,000 S32,800 Securities Other 11,600 $2,300 a. (2 pts) Calculate equity capital (bank capital) of The Peoples bank b, (3 pts) ROA for Peoples bank was 0.37%. Calculate ROE. c. (3 pts) Suppose the reserve requirement is 10%. Calculate excess reserves of The Peoples bank d. (4 pts) Suppose The Peoples Bank is surprised by a VERY LARGE withdrawal from depositors and does not hold enough in reserves. Provide 3 ways that the bank could raise the funds to satisfy this withdrawal. List in order of least cost to bank to greatest

Explanation / Answer

1. Equity Capital of bank is $

5340.

2.

3.

4. Three ways to face urgent fund requirements are

(i) Borrowing

(ii) release of securities

(iii) raising equity

Reserve 3120 Checkable Deposits 16100 Short term loans 2700 Savings Deposits 32100 Consumer Loans 3020 Borrowings 2000 Real Estate Loans 32800 Securities 11600 Equity Capital (Balance) 5340 Other 2300 55540 55540

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