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RESERVE REQUIREMENTS

All numbers are in millions. given that reserves are required to be 10% of deposits, Bank A is clearly short on meeting its reserve requirement. In the blank balance sheets, write in the balance sheet positions of each bank after Bank B loans Ban A funds in the federal funds market so that both banks can meet their reverse requirements.

BANK A BANK B
ASSETS LIABILITIES ASSETS LIABILITIES

Reserves 0.8 Deposits 10.0 Reserves 1.2 Deposit 10
Loans 8.0 Borrowing 0 Loans 8.0 Borrowing 0
Securities 2.2 Bank Capital 1.0 Securities 1.8 Bank Capital 1

my answer: I am not sure if the answer is correct. Please check the exercise for me. Thank you.

BANK A BANK B
ASSETS LIABILITIES ASSETS LIABILITIES

Reserves 1.0 Deposits 10.0 Reserves 1.2 Deposit 10
Loans 8.0 Borrowing 1.0 Loans 8.0 Borrowing 0
Securities 2.2 Bank Capital 1.0 Securities 1.8 Bank Capital 1

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RESERVE REQUIREMENTS
All numbers are in millions. Given that reserves are required to be 10% of deposits, Bank A is clearly short on meeting its reserve requirement. In the blank balance sheets, write in the balance sheet positions of each bank after Bank B loans Bank A funds in the federal funds market so that both banks can meet their reserve requirements.

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Solution Summary

This solution is comprised of a detailed explanation to write in the balance sheet positions of each bank after Bank B loans Ban A funds in the federal funds market so that both banks can meet their reverse requirements.

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