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# Bank Balance Sheet

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Suppose that a bank faces a balance sheet illustrated below, and the required reserve ratio is 20%.

ASSETS LIABILITIES
Reserves \$50,000 Deposits \$100,000
Loans \$50,000
Total \$100,000 Total \$100,000

A. How much more could this bank loan out without acquiring additional funds?

B. Starting with the balance sheet above, suppose that a large depositor withdraws \$50,000. With what action might the bank respond to this withdrawal, assuming other depositors are not available.

C. Draw a new balance sheet reflecting the end result after the changes explained in part B.

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#### Solution Preview

A. How much more could this bank loan out without acquiring additional funds?

As the required reserve ratio is 20% and that the Reserves in the balance sheet is \$50,000, we can find the total amount of bank loan as follows:-

50,000/20% = \$250,000

Since the bank has already loan out \$50,000, then the bank can loan an additional of ...

#### Solution Summary

This solution is comprised of a detailed explanation to find how much bank can loan out without acquiring additional funds.

\$2.19