A bank has $261 million in total reserves, of which $12 million are excess reser

Question

A bank has $261 million in total reserves, of which $12 million are excess reserves. The bank currently has $3.519 billion in loans, $0.938 billion in securities, and $139 million in other assets. The required reserve ratio for transactions deposits is 8 percent.

Calculate the sum of this bank's total amount of liabilities and net worth. $__ billion (Round your answer to two decimal places.)

Calculate the additional amount of loans this bank can make to households and firms. $__million.

Calculate the current quantity of transactions deposits at this bank. $ __billion.(Round your answer to two decimal places.)

Explanation / Answer

(a) Total assets = Total reserves + Loans + Securities + Other asets = $(261 + 3,519 + 938 + 139) Million

= $4,857 million = $4.86 billion

Since Assets = Liabilities + Net worth,

Liabilities + Net worth = $4.86 billion

(b) Additional loans bank can make = Excess reserves = $12 million

(c) Required reserves = Total reserves - Excess reserves = $(261 - 12) million = $249 million

Also, Required reserves = Transaction deposits x 8%

$249 million = Transaction deposits x 8%

Transaction deposits = $249 million / 0.08 = $3,112.5 million = $3.11 billion

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