Question

6. Table 1 shows the financial position of Bank Uno once $2755.002755.00 has been deposited.

Assume that the required reserve ratio is 7.007.00%, that banks do not keep excess reserves, and that all the money loaned out from Bank Uno is deposited into Bank Duo (whose loans go to other banks not shown here).

Once the lending and depositing process is complete, what will the accounts look like in Tables 2 and 3? Specify all answers to two decimal places.

Table 1. Bank Uno's Initial T-Account

Assets	Liabilities
Reserves: $2755.00	Deposits: $2755.00

Table 2. Bank Uno's T-Account After Loans

Assets	Liabilities
Reserves: ?	Deposits: ?
Loans: ?

Table 3. Bank Duo's T-Account After Deposits and Loans

Assets	Liabilities
Reserves: ?	Deposits: ?
Loans: ?

What are Bank Uno's deposits in Table 2?

$

What are Bank Uno's reserves in Table 2?

$

What are Bank Duo's loans in Table 3?

$

What are Bank Uno's loans in Table 2?

$

Answer 1

Solution:-

Table 2. Bank Uno's T-Account after Loans

Assets	Liabilities
Reserves:- $192.85	Deposit:- $2755
Loans:- 2562.15

Required Reserve Ratio is 7%

Required Reserves is 7% of Deposits = 7% * $2755

                                                            = $192.85

Excess Reserves = Actual Reserves - Required Reserves

                             = $2755 - $192.85

                             = $2562.15

Amount given as loan = $ 2562.15

Bank Uno's deposits in Table 2 = $2755

Bank Uno's reserves in Table 2 = $192.85

Bank Uno's loans in Table 2 = $2562.15

                             Table 3. Bank Duo's T-Account after Deposits and Loans

Assets	Liabilities
Reserves:- $179.35	Deposit:- $2562.15
Loans:- $2382.8

New deposits will be $2562.15

New Required Reserves is 7% of Deposits = 7% * $2562.15

                                                                                 = $179.35

Excess Reserves = Actual Reserves - Required Reserves

                             = $2562.15 - $179.35

                             = $2382.8

Amount given as loan = $ 2382.8

Bank Duo's loans in Table 3 = $2382.8