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# Bank Balance Sheets and Finance

1
New bank started its first day of operations with \$6 million in capital .A total of \$100 million in checkable deposits is received .The bank makes a \$25 million commercial loan and another \$25 million in mortgage loans .If required reserves are 8%, what does the bank balance sheet looks like.

2
New bank decides to invest \$45 million in 30 day T-Bills . The T-Bills are currently trading at \$4,986.70(including commissions) for a \$5,000 face value instrument .How many do they purchase ? What does the balance sheet look like?

3
Consider a failing bank ,A deposit of 350,000 is worth how much if the FDIC uses the payoff method? The purchase and assumption method? which is more costly to tax payers?

4
If the below bank makes a loan commitment for \$10 million to a commercial customer .Calculate the banks' capital ratio before and after the agreement. Calculate the banks risk-weighted assets before and after the agreement.
Assets Liabilities
Required Reserves 8 million Checkable deposits \$100 million
Excess Reserves 3 million Bank Capital \$6 million
T Bills 45 million
Commercial Loans 50 million

#### Solution Preview

1
New bank started its first day of operations with \$6 million in capital. A total of \$100 million in checkable deposits is received .The bank makes a \$25 million commercial loan and another \$25 million in mortgage loans. If required reserves are 8%, what does the bank balance sheet looks like.
Assets Liabilities
Required reserves \$8 million Checkable deposit \$100 million
Excess reserves \$48 million Bank Capital \$6 million
Loans \$50 million
Workings
Required reserves = reserve percentage * checkable deposits = 8%*\$100 million = \$8 million
Loans = commercial loan + mortgage = \$25 million + \$25 million=\$50 million
Excess reserves = Total liabilities - loans - required reserves = \$106 million - \$50 million - \$8 million = \$48 million

2
New bank decides to invest \$45 million in 30day T-Bills . The T-Bills are currently trading at \$4,986.70(including commissions) for a \$5,000 face value instrument .How many do they purchase ? What does the balance sheet look like?
No of T bills purchased = Amount invested / price of T bill = \$45 million / \$4986.70 = 9024 T Bills
Face Value of T Bills = 9024*5000=\$45.12 million
Assets ...

#### Solution Summary

The expert examines bank balance sheets and finances.

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