1) Assume that the reserve requirement ratio is 10%, and the minimum risk-weighted capitalization requirement...
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Finance
1) Assume that the reserve requirement ratio is 10%, and the minimum risk-weighted capitalization requirement is 8%. The balance sheet of the bank is given by the following:
Assets Liabilities
Cash in vault,10 Deposits 200
Deposits at Fed:50 Borrowings 100
U.S. T-Bills100
Residential Mortgage loans100
Consumer loans100
a) calculate total assets b) calculate total liabilities c) calculate bank capital d) calculate risk-weighted assets e) Calculate the capital-to-risk-weighted-assets ratio, and comment on its adequacy f) calculate excess reserves
2) Suppose the respective rates of interest on the assets and liabilities in the example above are given by the following:
T-Bills: 5%
Mortgages 7%
Consumer Loans 8%
Borrowings 6%
Other items 0%
a) calculate the Return on Assets b) calculate the Return on Equity c) calculate the leverage
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