Here again is the balance sheet information for Cipher Bank. It will be repeated

Question

Here again is the balance sheet information for Cipher Bank. It will be repeated in future questions to make things a bit easier. Note that you can, and may have to, calculate anything marked with a"???," and anything not included or otherwise calculable $0 Assets Liabilities and Owner's Equity Buildings and furniture $900 Cash $80 Commercial paper $500 Deposit in the Fed $320 Checking deposits $2100 Savings deposits $800 Time deposits $200 Borrowing from Bank B $500 Government agency bonds $800 Borrowing from the Fed $1600 Home mortgages $1200 Loan to Bank A $400 Loans to firms $1100 Loans to households $1300 Municipal bonds $1400 US government bonds $600 Other liabilities $1000 Equity $??? Total assets $8600 Total liabilities and owner's equity-???

Explanation / Answer

Answer: -

To Find the value of Equity: -

As per accounting principal for 'Balance Sheet", 'asset' should always be equal to 'liabilities' and 'shareholder's equity'.

Here, 'Total Asset' is $8600, hence 'Total Liabilities and Equity' will also be equal to $8600.

With all the values of 'Liabilities and Equity' side is given except that of Equity, we can calculate 'Equity' by deducting all the values from $8600 hence we get 'Equity' = $2400 [=$8600 - $2100 - $800 - $500 - $1600 - $1000].

'Risk-Adjusted' Leverage Ratio: -

Equity = $2400 (as calculated above)

Debt or Liability = $6200. [Note: This is arrived at by deducting 'Total Liability and Equity' from 'Equity' which is $8600 - $2400 = $6200]

Capital = Debt + Equity = $6200 + $2400 = $8600

Asset Calculation:

Ratios: -

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