Question

5. Table 1 shows the financial position of the Smithville Bank once $3145.00$3145.00 has been deposited.

Table 1. Original Assets and Liabilities

Assets	Liabilities
reserves: $3145.00$3145.00	deposits: $3145.00$3145.00

Assume that the required reserve ratio is 9.00%9.00% .

The bank manager decides to lend Billy Bob Smith all of the bank's excess reserves. Billy Bob takes the funds to Eula Mae's Used Machines and buys a pickup truck. Eula Mae then deposits the money in her account back at the Smithville Bank.

Table 2. Assets and Liabilities After Bank Makes a Loan

Assets	Liabilities
reserves: ?	deposits: ?
loans: ?

Table 2 should show the bank's accounts after the loan is made and the funds again deposited. Round all answers to the nearest cent.

What are the bank's loans in Table 2?

$

What are the bank's reserves in Table 2?

$

What are the bank's deposits in Table 2?

Answer 1

Solution:-

Table 2:-

Assets	Liabilities
Reserves:- 283.05	Deposit:- $3145
Loans:- 2861.95

Required Reserve Ratio is 9%

Required Reserves is 9% of Deposits = 9% * $3145

                                                            = $283.05

Excess Reserves = Actual Reserves - Required Reserves

                             = $3145 - $283.05

                             = $2861.95

Amount given as loan = $ 2861.95

The bank's loans in Table 2 = $2861.95

The bank's reserves in Table 2 = $283.05

The bank's deposits in Table 2 = $3145