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Balance Sheet Checkable Deposits

The balance sheet of a bank follows. Suppose that the reserve requiremnet is 3% on the first $30 million of checkable deposits and 10% on checkable deposits in excess of $30 million. ( the amounts on the balqnce sheet are in millions of dollars): balance sheet:

Reserves $15.9------------------Transacations deposits $180.0
Loans $150.0--------------------Equity captial $20.0
Securities $34.1-----------------Total $200.0
Total $200.0

A. Calculate the banks excess reserves.
B. Suppose that the bank sells $5 million in securities to get new cash. Show the bank's balance sheet after this transaction. What are the bank's excess reserves?
C. Suppose that the bank makes a loan to a customer equal to the amount of its excess reserves from part b. show the bank's balance sheet before the customer spends the proceeds of the loan. what are the bank's excess reserves?
D. Now suppose that the customer spends the proceeds of the loa. Show the bank's balance sheet, and calculate its excess reserves.

Solution Preview

A) Deposits = 180 with first 30 requiring 3% and any over that requiring 10%

30 x .03 = .9
(180 - 30) x .10 = 15
Required Reserves = 15.9

Excess Reserves = Actual Reserves - Required Reserves
= 15.9 - 15.9 = 0
Excess Reserves would be any over this, which is 0 since the actual reserves = required reserves.

Assets-----------------------------Liabilities+Capital ...

Solution Summary

The balance sheets for checkable deposits is examined.