Consider the following balance sheet (All figures are in millions) Naturally che

Question

Consider the following balance sheet (All figures are in millions) Naturally checking account, deposits at the fed and cash are not interest bearing Fixed expenses arc $5 and required reserves are 5% Suppose that interest rates rise by 0.3%. What will happen to the bank's profits? (Hint: consider anything with more than 1 year to maturity as fixed-rate) What would have to happen for the bank to go bankrupt? How could they reduce their risk of bankruptcy? How much would depositors have to withdraw before the bank has less than its required reserves and must sell off some securities What is this bank's Return on Equity (ROE)?

Explanation / Answer

Hi,
Please refer to the following excel file, if you have any confusion, please comment, and I shall surely help.

If satisfied, please rate this answer.

https://dl.dropbox.com/u/83216089/asol/liabilities--q3797811.xlsx

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