Question
In: Economics
You are the employed by the First National Bank. This bank has $5 million in capital....
You are the employed by the First National Bank. This bank has $5 million in capital. They have $100 in checkable deposits. Of that they keep only the 10% required reserves and loan the rest out. In $45 million in business loans and $50 million in residential mortgages. How well capitalized is First National Bank? Calculate the risk weighted level of assets and risk weighted leverage ratio. Why are leverage (capital) ratios important for financial regulators and institutions?
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
You are the employed by the First National Bank. This bank has $5 million in capital....
You are the employed by the First National Bank. This bank has
$5 million in capital. They have $100 in checkable deposits. Of
that they keep only the 10% required reserves and loan the rest
out. In $45 million in business loans and $50 million in
residential mortgages. How well capitalized is First National Bank?
Calculate the risk weighted level of assets and risk weighted
leverage ratio. Why are leverage (capital) ratios important for
financial regulators and institutions?
Suppose the First National Bank of Austin has $500.00 million in total assets with an average...
Suppose the First
National Bank of Austin has $500.00 million in total assets with an
average asset duration of five years. Assume that the bank’s
liabilities are comprised of $86.75 million of demand deposits and
$163.75 million in bonds with a 4.00% coupon rate (which pays
annually) and a five year time-to-maturity. Further assume that
current market interest rates are at 9.00% per annum. Show
work.
(a.) Calculate the
duration of the bank’s bonds.
(b.) What is this bank’s duration...
19.Assume that Paris First National Bank is a thriving bank with deposits of $20 million. If...
19.Assume that Paris First National Bank is a thriving bank
with deposits of $20 million. If the required reserve ratio is 20
percent and the bank is fully loaned out, the bank will keep what
amount of required reserves?
a.$2 million.
b.$4 million.
c.$10 million.
d.$16 million.
e.$20 million
20.The required reserve ratio for a bank is set by:
a.Congress.
b.the bank itself.
c.the Treasury Department.
d.the Federal Reserve.
(2.)Suppose the First National Bank of Duluth has $500.00 million in total assets with an average...
(2.)Suppose the First National Bank of Duluth has $500.00 million
in total assets with an average asset duration offive years. Assume
that the bank’s liabilities are comprisedof $86.75 million of
demand deposits and $163.75 million inbonds with a 4.00% coupon
rate (which pays annually) and a fiveyear time-to-maturity. Further
assume that currentmarket interest rates are at 9.00% per annum.
(a.)(2 point) Calculate the duration of the bank’s
bonds.
If the Fed sells $3 million of bonds to the First National Bank, what happens to...
If the Fed sells $3 million of bonds to the First National Bank,
what happens to reserves and the monetary base? What will be the
overall effect on the money supply? Using T-accounts show at least
three steps in the deposit creation process.
Assume that the required reserve ratio on checkable deposits is
10%, banks do not hold any excess reserves, and the public’s
holdings of currency do not change.
The manager of the bank where you work tells you that your bank has $5 million...
The manager of the bank where you work tells you that your bank
has $5 million in excess reserves. She also tells you that the bank
has $300 million in deposits, $50 million in government bonds, and
$200 million in loans. Show your bank’s T-account. What is the
required reserve ratio? What is the money supply multiplier?
Suppose a customer withdraws $10 million. Show your bank’s new
T-account. Does your bank now still meet the minimum reserve
requirement? If not,...
A Bank has $100 million in capital, and $900 million of checkable deposit. The bank currently...
A Bank has $100 million in capital, and $900 million of
checkable deposit. The bank currently maintains a total reserve of
$100 million dollars, $200 million in T-bills, and rest in loans. A
new corporate customer opens a checkable deposit account, and
deposit $100 million.
1a. Please show the T-Account of the bank after the deposit?
1b. If the required reserve ratio is 10%, what is likely to
happen?
1c. If the required rate for reserves increase to 11%, what...
Framingland Bank starts its first day of operations with $11 million in capital. A total of...
Framingland Bank starts its first day of operations with $11
million in capital. A total of $160 million in checkable deposits
is received. The bank makes a $30 million commercial loan and
another $60 million in mortgages with the following terms: 200
standard, 30-year, fixed-rate mortgages with a nominal annual rate
of 5.25%, each for $300,000. Assume that the reserve requirement is
9%. .
How well capitalized is this bank? Explain why and show your
calculations to support your answer....
uestion 44 Suppose that National Bank of Guerneville has ?$35 million in checkable? deposits, Commonwealth Bank...
uestion 44 Suppose that National Bank of Guerneville has ?$35
million in checkable? deposits, Commonwealth Bank has ?$42 million
in checkable? deposits, and the required reserve ratio for
checkable deposits is? 10%. If National Bank of Guerneville has? $4
million in reserves and Commonwealth has? $5 million in? reserves,
how much in excess reserves does each bank? have? ?(Enter your
answers rounded to one decimal? place.) Now suppose that a customer
of National Bank of Guerneville writes a check for...
First National Bank Balance sheet Assets &
First National Bank Balance sheet
Assets
Liabilities
Rate-sensitive $20
million $50
million
Fixed-rate
$80 million $50
million
4) Given the above table and assuming that the average duration
of its assets is four years, while the average duration of its
liabilities is three years, then a 5 percentage point increase in
interest rates will cause the net worth of First National to
________ (increase/decline) by ________ (5% /10%/ 15%/ 20%) of the
total original asset value (use...
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