Note that you can, and may have to, calculate anything marked with a \"???,\" an

Question

Note that you can, and may have to, calculate anything marked with a "???," and anything not included or otherwise calculable = $0.

Additional information

No loans are currently charged off, but 20% of residential mortgage (home) loans are nonperforming.

Use the reserve requirement ratio we've used in all graded assignments. (10%)

Interest income = $240

Income from non-interest sources (letters of credit, fees) = $20

Interest expense = $50

Non-interest expense (wages and salaries) = $80

All borrowings, and half of the loans to business firms, will be repriced in the next month.

Economists expect interest rates to rise in the near future.

Calculate the maximum amount of new money this bank, on its own, can create. Carefully follow all numeric instructions.

Assets Liabilities and Owner's Equity Buildings and furniture $900
Cash $80
Commercial paper $500
Deposit in the Fed $320
Government agency bonds $800
Home mortgages $1200
Loan to Bank A $400
Loans to firms $1100
Loans to households $1300
Municipal bonds $1400
US government bonds $600 Checking deposits $2100
Savings deposits $800
Time deposits $200
Borrowing from Bank B $500
Borrowing from the Fed $1600
Other liabilities $1000
Equity $???



Total assets = $8600 Total liabilities and owner's equity = ???

Explanation / Answer

Ans.

Assets Liabilities and Owner's Equity Buildings and furniture $900 Checking deposits $2100 Cash $80 Savings deposits $800 Commercial paper $500 Time deposits $200 Deposit in the Fed $320 Borrowing from Bank B $500 Government agency bonds $800 Borrowing from the Fed $1600 Home mortgages $1200 Other liabilities $1000 Loan to Bank A $400 Equity $ 2400 Loans to firms $1100 Loans to households $1300 Municipal bonds $1400 US government bonds $600 Total assets = $8600 Total liabilities and owner's equity = $8600 Explanation :- Total assets = Total liabilities and owner's equity so i.e to 8600$ Equity = 8600-(2100+800+200+500+1600+1000) 24000$ Interest income 24$ Income from non-interest sources (letters of credit, fees) 20$ Less Interest Expenses -50$ Non interest expenses -80 $ Net income 130$ Amount transfer to reserve -13 $ maximum amount of new money this bank, on its own, can create 117$

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