Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. a if the bank suffers a deposit outflow of $5 mill

a If the bank suffers a deposit outflow of $5 million and the required reserve...

60.1K

Verified Solution

Question

Accounting

image
a If the bank suffers a deposit outflow of $5 million and the required reserve ratio on deposits of 15%, what is the new balance of the bank's reserves? (5\%) b Using a T-account, show these changes. (10\%) c Show the bank's new balance sheet. (10\%) What is the amount of bank's excess reserves? (5\%) d Based on you answer in part c), what is the minimum deposit outflow that the bank can withstand without having to take any further action other than using its own reserves? (10\%). e Based on the initial balance sheet, what is the maximum loan loss that the bank can suffer without becoming insolvent? (5\%) f Suppose the bank receives $50 million in checkable deposits and now, the bank chooses not to hold any excess reserves but to make loans instead. Based on the initial balance, what is the maximum amount of new loans that can be issued by the bank? ( 10%)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students