Principle of Finances, business and finance homework help

User Generated

Fnenfuuq

Business Finance

Description

Complete the following from the textbook:

  • Chapter 4: E2
  • Chapter 5: P1, P6

Screenshots of the problems are attached

Unformatted Attachment Preview

a. PROBLEMS 1. Assume that Banc One receives a primary deposit of $1 million. The bank must keep reserves of 20 percent against its deposits. Prepare a simple balance sheet of assets and liabilities for Banc One immediately after the deposit is received. 2. Assume that Bank A receives a primary deposit of $100,000 and that it must keep reserves of 10 percent against deposits. a. Prepare a simple balance sheet of assets and liabilities for the bank immediately after the deposit is received. b. Assume Bank A makes a loan in the amount that can be safely lent. Show what the bank's balance sheet of assets and liabili- ties would look like immediately after the loan. Assume that a check in the amount of the derivative deposit created in (b) was written and sent to another bank. Show what Bank A's (the lending bank's) balance sheet of assets and liabilities would look like after the check is written. 3. Rework Problem 2 assuming Bank A has reserve requirements that are 15 percent of deposits. b. How would your answer in (a) change if the reserve require- ment had been 9 percent? 6. Assume a financial system has a monetary base (MB) of $25 million. The required reserves ratio is 10 percent, and no leakages are in the system. What is the size of the money multiplier (m)? b. What will be the system's money supply? 7. Rework Problem 6 assuming the reserve ratio is 14 percent? 8. The BASIC financial system has a required reserves ratio of 15 percent; initial excess reserves are $5 million, cash held by the public is $1 million and is expected to stay at that level, and no other leak- ages or adjustments are in the system. What would be the money multiplier and the maximum amount of checkable deposits? b. What would be the money supply amount in this system after deposit expansion? C. a. a. 4. Assume two banks, A and Z, exist in the banking system. Bank A receives a primary deposit of $600,000, and it must keep reserves of 12 percent against deposits. Bank A makes a loan in the amount that can be safely lent. a. Show what Bank A's balance sheet of assets and liabilities would look like immediately after the loan. b. Assume that a check is drawn against the primary deposit made in Bank A and is deposited in Bank Z. Show what the balance sheet of assets and liabilities would look like for each of the two banks after the transaction has taken place. Assume that Bank Z makes a loan in the amount that can be safely lent against the funds deposited in its bank from the transaction described in (b). Show what Bank Z's balance sheet of assets and liabilities would look like after the loan. 5. The SIMPLEX financial system is characterized by a required reserves ratio of 11 percent; initial excess reserves are $1 million, and there are no currency or other leakages. a. What would be the maximum amount of checkable deposits after deposit expansion, and what would be the money multi- plier? c. to $500,000 with an equal amount becoming excess reserves and the required reserves ratio drops to 12 percent. 10. The COMPLEX financial system has these relationships: The ratio of reserves to total deposits is 12 percent, and the ratio of noncheckable deposits to checkable deposits is 40 percent. In addi- tion, currency held by the nonbank public amounts to 15 percent of checkable deposits. The ratio of government deposits to checkable deposits is 8 percent, and the monetary base is $300 million. Determine the size of the Ml money multiplier and the size of the money supply. b. If the ratio of currency in circulation to checkable deposits were to drop to 13 percent while the other ratios remained the same, what would be the impact on the money supply? C. If the ratio of government deposits to checkable deposits increases to 10 percent while the other ratios remained the same, what would be the impact on the money supply? d. What would happen to the money supply if the reserve requirement increased to 14 percent while noncheckable deposits to checkable deposits fell to 35 percent? Assume the other ratios remain as originally stated.
Purchase answer to see full attachment
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Explanation & Answer

Hello, kindly check whether the uploaded paper meets your requirements. If you have any questions, am here for you. In case there are no amendments, you can release the funds. Looking forward to work for you in future.

Surname 1

Student
Instructor
Course
Date

1.
Banc One
Balance sheet
Immediately after receiving $1,000,000
Assets

Liabilities

Reserves =$200,000

Capital =$1,000,000

Cash available = $800,000
Total

=$1,000,0000

Debit assets; reserves $200,000
Debit assets; cash available =$800,000
Increase in liabilities of the bank=$1,000,000

Total

=$1,000,000

Surname 2
2.
a)
Bank A
Balance sheet
Immediately after receiving $100,000.00
Assets

Liabilities

Reserves =$10,000.00

Deposits =$100,000.00

Cash available =$90,000.00
Total =$100,000.00

Total=$100,000.00

b)
Bank A
Balance sheet
Immediately after receiving loan
Assets

Liabilities

Reserves =$100,000.00

Deposits =$190,000.00

Lo...


Anonymous
Really helpful material, saved me a great deal of time.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Related Tags