Consider a bank with the following balance sheet: Assets Required reserves Exces

Question

Consider a bank with the following balance sheet: Assets Required reserves Excess reserves T-bills Commercial loans $ 9 million Checkable deposits$ 110 million $ 3 million Bank capital $ 44 million $10 milion 64 million The bank makes a loan commitment for $20 million to a commercial customer. Before the commitment, the bank's capital ratio equals 8.33%. (Round your response to two decimal places.) After the commitment, the bank's capital ratio equals %. Round your response to two decimal places.

Explanation / Answer

Total liabilities= 110+10= 120 million

Capital ratio=100* capital/total liabilities=100* 10/120= 8.33%

Because loan aggement has no accounting transactions, capital ratio remains the same.

After the commitment, banks capital ratio equals 8.33%

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