Using the spreadsheet, setup the balance sheet for Eagle Bank when the reserve requirement is 10%:...

Using the spreadsheet, setup the balance sheet for Eagle Bank when the reserve requirement is 10%: Equity 20, Securities 70, Savings deposits 10, Personal Loans 40, Retained earnings 20, Time deposits 30, Home mortgages 60, Demand deposits 100.

Assets		Liabilities
Securities	70	Equity	20
Personal Loans	40	Savings Deposits	10
Home Mortgages	60	Retained Earnings	20
Cash reserves (10% of deposits)	14	Time Deposits	30
Cash with bank	96	Demand Deposits	100

Total	280	Total	280

I am confused on if my cash with bank and reserves are correct. Saw someone say that the mortgages are liabilities, but my prof specified they're assets.

Expert Solution

Answer:-

In the given question Eagal Bank requires reserve of 10%. It means the bank can lend only 90% out of the deposit received. In this case total deposit is $ 140 (Saving Deposits $10, Time Deposits $30 and Demand Deposits 100) hence fractional reserve shall be $140 * 10%= $14.

Home Morgage is a type of loan given by bank to its customer. It is basically given for purchase of Residence. In this loan Borrower transfers the title of that property to the bank on the condition to get back the title on complete repayment of the loan. Hence Home Mortgages is Assets for the Banking Company.

There shall be no Cash or Bank Balance remains. The difference between Assets and liability shall be treated as Net Worth . Hence the correct Balance Sheet of the Bank is as follows:-

Assets	Amount	Liabilities	Amount

Securities	70.00	Equity	20.00

Personal Loans	40.00	Retained Earnings	20.00

Home Mortgage	60.00	Deposits :-
		Savings Deposits	10.00
Fractional Reserve @10%	14.00	Time Deposits	30.00
		Demand Deposits	100.00

		Net Worth	4.00

Total	184.00	Total	184.00

ekkarill92 answered 2 years ago

Suppose a bank has $1 million in deposits, a reserve requirement of 10%, and bank reserves...

Suppose a bank has $1 million in deposits, a reserve requirement of 10%, and bank reserves of $300,000. The bank has excess reserves of: Question 16 options: a) $200,000. b) $100,000. c) $300,000. d) $50,000. f the economy is producing at an output level below full employment, the government should __ spending and __ taxes. Question 9 options: a) increase; decrease b) decrease; decrease c) decrease; increase d) increase; increase The following diagram represents the economy experiencing inflation at point...

Consider the following simplified balance sheet for a bank. Suppose the required reserve ratio decreases from 10...

Consider the following simplified balance sheet for a bank. Suppose the required reserve ratio decreases from 10 percent to 5 percent. By how much will bank deposits increase? Provide your answer in dollars measured in thousands rounded to two decimal places. Do not include any symbols, such as "$," "=," "%," or "," in your answer. Assets Liabilities Reserves $10 thousand Deposits $100 thousand Consider the following simplified balance sheet for a bank. Suppose the required reserve ratio decreases from 10 percent to...

15. If a bank faces a reserve requirement of 8 percent and has a reserve ratio...

15. If a bank faces a reserve requirement of 8 percent and has a reserve ratio of 12 percent, then A. government regulation requires the bank to use at least 8 percent of its deposits to make loans. B. the bank’s ratio of loans to deposits is 8 percent. C. the bank keeps 8 percent of its deposits as reserves and loans out the rest. D. the bank keeps 12 percent of its assets as reserves and loans out the...

Suppose that the Central Bank decided to increase percent of Reserve Requirement Ratio (RRR) from 10%...

Suppose that the Central Bank decided to increase percent of Reserve Requirement Ratio (RRR) from 10% to 15% to solve inflation problem. With the aid of money market diagram, explain the impact of an increase in RRR to the money market equilibrium.

Refer to Table 29-5. If the bank faces a reserve requirement of 6 percent, then the bank

8. Refer to Table 29-5. If the bank faces a reserve requirement of 6 percent, then the bank a. is in a position to make a new loan of $12,000. b is in a position to make a new loan of $18,000 c. has excess reserves of $12,000. d. None of the above is correct. 9. Refer to Table 29-5. If the bank faces a reserve requirement of 8 percent, then the bank a. is in a position to make...

If the Federal Reserve wants to increase the money supply in the economy using Reserve Requirement...

If the Federal Reserve wants to increase the money supply in the economy using Reserve Requirement (RR), what does it do?

If the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and...

If the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $10, then this bank A. must increase its required reserves by $10. B. will initially see its total reserves increase by $10.50. C. will be able to make new loans up to a maximum of $9.50. D. All of the above are correct.

Assume that $1.4 million is deposited into a bank with a reserve requirement of 15 percent....

Assume that $1.4 million is deposited into a bank with a reserve requirement of 15 percent. Instructions: Round your answer to two decimal places. a. What is the money supply as a result? b. If the government decides to raise the reserve requirement to 20 percent, what is the value of the money supply in this case?

2. Assume that Susan deposits $3000 of cash into bank A and the reserve requirement is...

2. Assume that Susan deposits $3000 of cash into bank A and the reserve requirement is 10%. a. Complete a simple T-account for bank A showing this deposit and asume that bank A lends out its excess reserves to Bill. b. Bill uses the entire loan to buy groceries at Rouses Supermarket and Rouses deposits it in bank B. Suppose bank B lends out all its excess reserves to Maria, and her loan ends up in bank C. Fill in...

The Cash Reserve Ratio requirement imposed by the central bank is 3%. 1)Suppose Bank A receives...

The Cash Reserve Ratio requirement imposed by the central bank is 3%. 1)Suppose Bank A receives a Rs. 5,000 deposit from a customer. Assuming that it wishes to hold no excess reserve beyond the regulatory requirement, determine how much the bank is free to lend (assuming no other restrictions). Show your answer on Bank A’s balance sheet. Assume that the loan created by Bank A ends up as deposit in Bank B which in turn creates another loan. Using the...

Question