A bank has $250 million in total reserves, of which $10 million are excess reser
ID: 2781626 • Letter: A
Question
A bank has $250 million in total reserves, of which $10 million are excess reserves. The bank currently has $3.575 billion in loans, $0.965 billion in securities, and $144 million in other assets. The required reserve ratio for transactions deposits is 12 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
From the question, we can list the following data:
Total Reserves = $250 million
Excess Reserves = $10 million
Loans = $3.575 billion = $ 3,575,000,000
Securities = $0.965 billion = $ 965,000,000
Other assets = $144 million = $ 144,000,000
Required reserve ratio = 12%
Calculate the sum of this bank's total amount of liabilities and net worth $ __ billion.
TOTAL LIABILITIES
The liability of a bank is the total transaction balance. It is given that the required reserve ratio for transaction deposits is 12%.
Reserves / Total transaction balance = 12%
$250,000,000 / Total transaction balance = 12%
Liability or Total transaction balance = $2,083,333,333.33 (or) $2.08 billion
NET WORTH:
Net Worth = Total Assets - Total Liabilities
Assets = (loans + securities + other assets)
($ 3,575,000,000 + $ 965,000,000 + $ 144,000,000) - $2,083,333,333.33
= $4,684,000,000 - $2,083,333,333.33
Net Worth = $2,600,666,666.67 (or) $2.60 billion
Calculate the additional amount of loans this bank can make to households and firms. $ __million.
The additional amount of loans this bank can make to households and firms is the amount of excess reserves i.e. $10 million
Calculate the current quantity of transactions deposits at this bank. $ __ billion.
The current quantity of transaction deposits are $2.08 billion. (Calculated in the first question)
The total transaction deposits are the same as the total liability of the bank.
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