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What is purpose of having a correspondent bank relationship

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Reference no: EM131032207

1. What is the purpose of having a correspondent bank relationship?

2. Discuss the advantages and disadvantages of a bank holding less cash.

Use the following information for questions 3- 4.

Bank Assets

Bank Liabilities

RAC

Cash and Treasury Securities

$ 2,500

Deposits

$ 13,800

$ -

Repurchase Agreements

$ 1,000

Subordinated Debt

$ 250

$ -

Municipal Bonds

$ 1,500

Cumulative Preferred Stock

$ 200

$ -

Single Family Home Mortgages

$ 2,700

Common Stock

$ 100

$ -

Commercial Loans

$ 4,000

Common Stock Surplus

$ 300

$ -

Agricultural Loans

$ 1,500

Retained Earnings

$ 350

$ -

Allowance for Loan Loss

$ (350)


$ -

Bank Buildings

$ 2,000


$ -

Goodwill

$ 150


$ -

Total

$ 15,000

$ 15,000

$ -

Capital

Requirements

Amount


Tier 1

$ -

$ 750


Total Capital

$ -

$ 950


Equity Capital

$ 450

$ 750


3. How much Tier 1 capital does the bank have?

  1. $100
  2. $400
  3. $450
  4. $750
  5. $950

4. How much Tier 2 capital does the bank have?

  1. $200
  2. $450
  3. $550
  4. $800
  5. $1100

5. Discuss the TARP Capital Purchase Program.

Reference no: EM131032207

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