Consider a bank with the following balance sheet: Assets Liabilities Required re
ID: 1192252 • Letter: C
Question
Consider a bank with the following balance sheet:
Assets
Liabilities
Required reserves
$10
million
Checkable deposits
$130
million
Excess reserves
$27
million
Bank capital
negative $18
million
Loans
$75
million
Assume that required reserves are 8%.
In order to avoid insolvency, regulators decide to provide the bank with $28 million in bank capital. Assume that bad news about mortgages is featured in the local newspaper, causing a bank run. As aresult, $40 million in deposits is withdrawn.
Show the effects of the capital injection and bank run on the balance sheet. (Round your responses to the nearest whole number.)
Assets
Liabilities
Required reserves
$
million
Checkable deposits
$
million
Excess reserves
$
million
Bank capital
$
million
Loans
$
million
Assets
Liabilities
Required reserves
$10
million
Checkable deposits
$130
million
Excess reserves
$27
million
Bank capital
negative $18
million
Loans
$75
million
Explanation / Answer
Assets Amount Liabilities Amount Required Reserves 8 Checkable Deposits 90 Excess Reserves 17 Bank Capital 10 Loans 75 Total 100 Total 100
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