Assets Liabilities Vault Cash $ 200 Million Checking Deposits ? Deposits with th
ID: 2654326 • Letter: A
Question
Assets Liabilities
Vault Cash $ 200 Million Checking Deposits ?
Deposits with the Fed $ 1.8 Billion Savings Deposits $8 Billion
Loans $ 8Billion
T-Bonds $ 4 Billion Bank Capital
?
What must be the total amount of checking deposits?
What is the amount of the bank’s capital?
Explanation / Answer
Excess reserves = Vault cash + Deposits with fed - Required reserves
1,5Billion = 0.2 Billion + 1.8 Bqillion - Required reeserves
Required reserves = 0.5 Billion
Money supply = Reserves * Money multiplier
= $ 0.5 Billion * 1/10%
= $ 5 Billion
Therefore, checking deposits are $ 5 Billion
Calculate bank's capital:
Total assets = Total liabilities + Bank's capital
Bank's capital = Total assets - Total liabilities
= ($0.2 Billion + 1.8 Billion + $ 8 Billion + $ 4 Billion) - ($ 8 Billion + $ 5 Billion)
= $ 1 Billion
Therefore, bank's capital is $ 1 Billion.