Please can someone please help me this week The reserve requirement is 3% on the
ID: 437517 • Letter: P
Question
Please can someone please help me this weekThe reserve requirement is 3% on the 1st $30 million of transacation deposits and 10% on transcation deposit in excess of $30 million.the bank holds no required clearing balances.
Bank Balance Sheet ( amounts in millions of dollars)
Assets------------Liabilities+Capital
Reserve15.9------Transactions 180.0
Securities 34.1---Deposits 0
Loans 150.0-----Capitals 20.0
Total Assets 200.0---Total Liabilities+ Capital 200.0
Question: Calculate the bank's excess reserves
Question: .Suppose that the bank sells $5 million in securtiies to get new cash. draw up the banks balance sheet after this transaction. what are the banks excess reserves?
Explanation / Answer
Currency held in bank vaults may be counted as legal reserves as well as deposits (reserve balances) at the Federal Reserve Banks. Both are equally acceptable in satisfaction of reserve requirements. A bank can always obtain reserve balances by sending currency to its Reserve Bank and can obtain currency by drawing on its reserve balance. Because either can be used to support a much larger volume of deposit liabilities of banks, currency in circulation and reserve balances together are often referred to as "high-powered money" or the "monetary base." Reserve balances and vault cash in banks, however, are not counted as part of the money stock held by the public.
For individual banks, reserve accounts also serve as working balances.(2) Banks may increase the balances in their reserve accounts by depositing checks and proceeds from electronic funds transfers as well as currency. Or they may draw down these balances by writing checks on them or by authorizing a debit to them in payment for currency, customers' checks, or other funds transfers.
Although reserve accounts are used as working balances, each bank must maintain, on the average for the relevant reserve maintenance period, reserve balances at their Reserve Bank and vault cash which together are equal to its required reserves, as determined by the amount of its deposits in the reserve computation period.