Question
In: Accounting
You have the following information on the Bank of Morrisland as of 04/17/2020: it currently holds...
You have the following information on the Bank of Morrisland
as of 04/17/2020: it currently holds a total of $250 million in
checking account deposits. It has borrowed $20 million from the
Federal Reserve as discount loans. It has raised another $80
million by borrowing through the REPO funding. It has also borrowed
100 million dollars through the overnights (Federal funds) market.
The bank’s current net worth (bank capital) is 40 million dollars.
The bank currently holds $100 million in treasury securities and
another $100 million in municipal bonds. The bank has made $65
million loans to consumers and $75 million loans to corporations.
The bank has made another $110 million loans in residential
mortgages. The bank has also issued two commercial loan commitments
to Superior Industries: one worth of $40 million to be honored on
October 1, 2020 and another worth of $35m to be honored on January
1, 2021. Assume that the required reserve ratio is 10%.
a. (8 pts.) What does the bank’s balance sheet look
like?
b. (4 pts.) If the bank has a return on assets of 2%,
calculate its return on equity.
c. (8 pts.) What is the bank’s leverage ratio? Is it a
well-capitalized bank? Is it a well-capitalized bank according to
Basel Accord?
d. (6 pts.) Following a trouble in the mortgage market, the
bank found that the present value of residential mortgages has
declined to 70 million dollars. As a result, regulators forced the
bank to sell these mortgages to recognize the fair market value. In
the meantime, hearing the news depositors pull out 25 million
dollars from the bank. What does the bank’s balance sheet look
like? How do these events affect its capital position?
e. (4 pts.) Find out how much capital injection is required in
this scenario so that the bank can reach a 10% capital ratio.
Solutions
ekkarill92 answered 2 years agoRelated Solutions
You have the following information on the Bank of Morrisland as of 04/17/2020: it currently holds...
You have the following information on the Bank of Morrisland
as of 04/17/2020: it currently holds a total of $250 million in
checking account deposits. It has borrowed $20 million from the
Federal Reserve as discount loans. It has raised another $80
million by borrowing through the REPO funding. It has also borrowed
100 million dollars through the overnights (Federal funds) market.
The bank’s current net worth (bank capital) is 40 million dollars.
The bank currently holds $100 million in...
Imagine you are a bank manager. Currently, your bank holds $4 million in deposits at a...
Imagine you are a bank manager. Currently, your bank holds $4
million in deposits at a 4% interest rate. However, you need to
increase the total deposits to $6 million. The interest rate
elasticity of savings is 1.20. What interest rate should you offer
to depositors to obtain the required amount, all other things being
equal? Use the midpoint method and round to two decimal places
throughout your calculations. Enter your answer in the box
below.
Problem 23-04 Sarasota Company had the following information available at the end of 2020. SARASOTACOMPANY COMPARATIVE...
Problem 23-04
Sarasota Company had the following information available at the
end of 2020.
SARASOTACOMPANY
COMPARATIVE BALANCE SHEETS
AS OF DECEMBER 31, 2020 AND 2019
2020
2019
Cash
$9,950
$4,010
Accounts receivable
20,550
12,960
Short-term investments
21,830
29,800
Inventory
42,340
35,030
Prepaid rent
2,990
12,090
Prepaid insurance
2,090
91
Supplies
990
75
Land
124,970
174,030
Buildings
353,000
353,000
Accumulated depreciation—buildings
(104,980
)
(86,810
)
Equipment
522,130
396,610
Accumulated depreciation—equipment
(128,890
)
(111,580
)
Patents
44,790
49,520
Total assets
$911,760
$868,826...
Problem 23-04 Sarasota Company had the following information available at the end of 2020. SARASOTACOMPANY COMPARATIVE...
Problem 23-04
Sarasota Company had the following information available at the
end of 2020.
SARASOTACOMPANY
COMPARATIVE BALANCE SHEETS
AS OF DECEMBER 31, 2020 AND 2019
2020
2019
Cash
$10,060
$4,000
Accounts receivable
20,520
12,890
Short-term investments
22,080
30,280
Inventory
41,830
34,940
Prepaid rent
3,020
11,990
Prepaid insurance
2,100
91
Supplies
1,000
75
Land
124,360
174,960
Buildings
349,270
349,270
Accumulated depreciation—buildings
(105,830
)
(87,870
)
Equipment
530,150
397,390
Accumulated depreciation—equipment
(131,220
)
(112,770
)
Patents
45,430
49,870
Total assets
$912,770
$865,116...
Problem 23-04 Sarasota Company had the following information available at the end of 2020. SARASOTACOMPANY COMPARATIVE...
Problem 23-04
Sarasota Company had the following information available at the
end of 2020.
SARASOTACOMPANY
COMPARATIVE BALANCE SHEETS
AS OF DECEMBER 31, 2020 AND 2019
2020
2019
Cash
$9,950
$4,010
Accounts receivable
20,550
12,960
Short-term investments
21,830
29,800
Inventory
42,340
35,030
Prepaid rent
2,990
12,090
Prepaid insurance
2,090
91
Supplies
990
75
Land
124,970
174,030
Buildings
353,000
353,000
Accumulated depreciation—buildings
(104,980
)
(86,810
)
Equipment
522,130
396,610
Accumulated depreciation—equipment
(128,890
)
(111,580
)
Patents
44,790
49,520
Total assets
$911,760
$868,826...
You are the accountant for ADO Corporation, and you have to prepare the journal for income taxes. You have gathered the following information for 2020:
You are the accountant for ADO Corporation, and you have to
prepare the journal for income taxes. You have gathered the
following information for 2020:Pretax financial income (i.e., pretax GAAP income) is
$520,000.The tax rate for 2020 is 40%.Depreciation expense on the tax return is $13,000 greater than
on the GAAP income statement.One of the corporation’s executives died in a plane crash. ADO
received life insurance benefits of $40,000.Rent revenue on the tax return (i.e., rent collected) is
$35,000 higher...
The following information is available for xyz company ltd. as at 12/31/17 Balance as per bank...
The following information is available for xyz company ltd. as
at 12/31/17
Balance as per bank statement $50,207.50
Balance as per general ledger $ 41,608.50
outstanding cheques $9,267
bank service charge $52
NSF checks $616
prepare a bank reconciliation and journal entries
Problem 7-04 Based on five years of monthly data, you derive the following information for the...
Problem 7-04
Based on five years of monthly data, you derive the following
information for the companies listed:
Company
ai (Intercept)
σi
riM
Intel
0.21
11.40
%
0.79
Ford
0.09
15.00
0.32
Anheuser Busch
0.19
6.60
0.70
Merck
0.06
8.30
0.73
S&P 500
0.00
5.00
1.00
Compute the beta coefficient for each stock. Do not round
intermediate calculations. Round your answers to three decimal
places.
Intel:
Ford:
Anheuser Busch:
Merck:
Assuming a risk-free rate of 7 percent and an expected...
You currently have $60,000 in your bank account and you will need a total of $100,000...
You currently have $60,000 in your bank account and you will
need a total of $100,000 in 5 years to pay for a down payment on a
house. What interest rate do you need to earn in order to have
$100,000 in your bank account 5 years from now?
You have received the following information:- Property, plant and equipment (PPE) at 30 June 2020 =...
You have received the following information:-
Property, plant and equipment (PPE) at 30 June 2020 = 800 000
carrying vale
Property, plant and equipment (PPE) at 30 June 2019 = 660 000
carrying value
Total depreciation for the 2020 year was R90 000. Plant with an
original cost of R100 000 and accumulated depreciation of R60 000
was sold in the 2020 year at a loss of R5 000. Equipment was
impaired by R20 000. Additional PPE was purchased and...
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