How much in excess reserves does the bank hold

Reference no: EM131023211

Consider the following simplified balance sheet for a bank:

Assets		Liabilities
Reserves	$10,000	Deposits	$70,000
Loans	$66,000	Stockholder's equity	$6,000

a. If the required reserve ratio is 0.10, or 10 percent, how much in excess reserves does the bank hold?

b. What is the maximum amount by which the bank can expand its loans?

c. If the bank makes the loans in part (b), show the immediate effect on the bank's balance sheet.

Reference no: EM131023211

Questions Cloud

Positive impact on economic growth : Does this fact affect the conclusion about whether the pre-reform or post-reform Scrooge had a more positive impact on economic growth? Briefly explain.

Determine expected return for securities with maturities : Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, four years on the following data.

Why does an open market purchase of treasury securities : Why does an open market purchase of Treasury securities by the Federal Reserve increase bank reserves? Why does an open market sale of Treasury securities by the Federal Reserve decrease bank reserves?

What is the opportunity cost of accepting the special order : Flexright industries manufactures glass globes for light fixtures. Their production costs for each case are as follows: Direct materials $30.00 Direct labor $20.00 Variable overhead $5.00 Fixed overhead $20.00 Total $75.00 Regular sales price $150.00..

How much in excess reserves does the bank hold : If the required reserve ratio is 0.10, or 10 percent, how much in excess reserves does the bank hold? What is the maximum amount by which the bank can expand its loans?

Prepare an unadjusted trial balance : Palisade Creek Co. is a merchandising business that uses the perpetual inventory system. The account balances for Palisade Creek Co. as of May 1, 2016 (unless otherwise indicated), are as follows:

European call option on a non-dividend-paying stock : What is the price of a European call option on a non-dividend-paying stock when the stock price is 65, the strike price is $60, the risk-free interest rate is 12% per annum, the volatility is 30% per annum, and the time to maturity is three months?

Non-dividend-paying stock when the stock price : Consider an option on a non-dividend-paying stock when the stock price is $107, the exercise price is $102, the risk-free interest rate is 5% per annum, the volatility is 25% per annum, and the time to maturity is four months. What is the price of th..

User Account

All Pages