Aplia 9. 9. Banking requirements Bank\'s Balance Sheet Assets Liabilities and Ow

Question

Aplia 9.

9. Banking requirements

Bank's Balance Sheet Assets Liabilities and Owners' Equity Reserves $150 Deposits $1,200 Loans $600 Debt $200 Securities 70 Capital (owners' equity) $100 Suppose the owners of the bank borrow $100 to supplement their existing reserves. This would increase the reserves account and decrease the account. This would also bring the leverage ratio from its initial value of 17.10 | to a new value of 17.10 Which of the following do bankers take into account when determining how to allocate their assets? Check all that apply. O The riskiness of each asset The size of the monetary base The total value of liabilities

Explanation / Answer

Answer to blank 1: increase

Answer to blank 2: debt

Answer to blank 3: 15

Answer to blank 4: 16

Explanation:

For initial total value of assets and liabilities are:

150 + 600 + 750 = 1200 + 200 + 100

1500 (Assets) = 1500(liabilities)

When $100 is added to reserve, same $100 will be added in libility side debt.

New values of assets and liabilities are: $1600

The initial leverage ratio = 1500 / 100 = 15

The new leverage ratio = 1600 / 100 = 16

Ans:

Explanation:

Riskier asset gives higher return. Here the bank has to make a trade off between riskness and profitability of the asset. Again, the bank has to make sure that there reserves are sufficient to meet regulatory requirements. The total value of liabilities also affect the total value of assets.

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