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    Bank Balance Sheets and Finance

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    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

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    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.

    $2.19

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