Leniency Bank wishes to cater to the demands of the residents of Prudence Island, RI,...
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Accounting
Leniency Bank wishes to cater to the demands of the residents of Prudence Island, RI, a savings-minded clientele with an unusual appetite for government securities. To this end, Leniency bank is planning a large government bonds purchase, which later will be offered to its account holders. The bonds are purchased with the reserves of the bank.
The following balance sheet describes the bank\'s current financial situation in millions of dollars.
Balance Sheet:
Leniency Bank Cash: $11
Checkable Reserves: $50
deposits: $220
Loans: $100
Stock shares: $46
Securities: $24
Property: $81 S
Suppose that the required reserve ratio set by the Fed is 10%.
What would be the largest government securities purchase Leniency Bank could afford before it becomes fully loaned up?
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