Using a t-account, arrange the following bank assets and liabilities and answer

Question

Using a t-account, arrange the following bank assets and liabilities and answer the questions:

Deposits $125,000
Vault cash $2,000
Net worth(capital) $20,000
Loans $50,000
Securities $83,000
Deposit at the Fed. $25,000
Other liabilities $15,000

1. Calculate
a. The bank's total assets and its total liabilities
b. It's current level of reserves
c. The reserves it is required to hold against demand deposits (assume that the required reserve ratio is 20%)
d. It's amount of excess reserves
e. The maximum amount of new loans it can make.

Explanation / Answer

Assets (2,000+ 50,000+83,000+25,000)= 160,000 Liabilities (15,000+ 125,000)= 140,000 Reserves (2,000+25,000)= 27,000 Required reserves 125,000* .20= 25,000 Excess reserves 27,000-25,000= 2,000 Max new loans 2,000.

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