5. Provided the following balance sheet, answer the questions below: Assets Liab

Question

5. Provided the following balance sheet, answer the questions below:

Assets                                                     Liabilities

Required reserves $8 M                             Checkable deposits $100M

Excess reserves $3 M                               Bank capital $6 M

T-bills $45 M

Commercial loans $50 M

a. What is the required reserve ratio?

b. What are the total reserves this bank holds?

c. What are the bank’s risk weighted assets?

d. If the bank commits to another $15 Million in its commercial loans, how has the capital ratio changed?

Explanation / Answer

a.   What is the required reserve ratio?

Required reserve ratio = required reserve/ checkable deposits =8M/100 m= 8%

b.   What are the total reserves this bank holds?

Required reserve +exess capital =8+3=11 Million

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