Question

A commercial bank has $150 in reserves, $450 in loans, $440 in checkable deposits and $160...

A commercial bank has $150 in reserves, $450 in loans, $440 in checkable deposits and $160 in capital. If the bank suffers a write down in loan asset value of $25, what is the new capital to total asset ratio (capital/assets)?

Group of answer choices

A) 12.5%

B) 15.5%

C) 20%

D)23%

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Ans: Total Assets of commercial bank before write off = Reserves + Loans

= $150 +$450 = $600

Total Liabilties of commercial bank before write off = Checkable Deposits + Capital

= $440 + $160 = $600

After write down in loan asset value of $25 loans value gets reduced by $25 and capital also gets reduced by $25.

New value of loans = $450 - $25 = $425

New Total Assets of commercial bank after write off = $150 + $425 = $575

New capital of commercial bank = $160 - $25 = $135

New capital to total assets ratio = New capital / Total assets

= $135/ $575 = 0.234 =23%

So option (d) is correct.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Bank of Central Texas has $5,550 in checkable deposits, $390 in reserves and loans at $5,160....
Bank of Central Texas has $5,550 in checkable deposits, $390 in reserves and loans at $5,160. Assume that the required reserve ratio is 4%.   A customer then withdraws $X and afterwards, the bank has zero excess reserves. What is X? Group of answer choices A) $155 B) $159 C) $175 D) $181
1. You are given this account for a bank Assets Liabilities Reserves $450 Deposits $3000 Loans...
1. You are given this account for a bank Assets Liabilities Reserves $450 Deposits $3000 Loans $2550 The required reserve ratio is 10% a. How much is the bank required to hold as reserves given its deposits of $3000? b. How much are its excess reserves? c. By how much can the bank increase its loans? d. Suppose a depositor comes to the bank and withdraws $200 in cash. Show the bank’s new balance sheet, assuming the bank obtains the...
1. Suppose the ABC bank has excess reserves of $5,000 and outstanding checkable deposits of $100,000....
1. Suppose the ABC bank has excess reserves of $5,000 and outstanding checkable deposits of $100,000. If the reserve requirement is 15 percent, what is the size of the bank's actual reserves? Group of answer choices $5,000. $10,000. $15,000. $20,000. 2. The reserves of a commercial bank consist of: Group of answer choices the amount of money market funds it holds. deposits at the Federal Reserve Bank and vault cash. government securities that the bank holds. the bank's net worth.
The bank you own has the following balance sheet: Assets Liabilities Reserves $150 million Deposits $1000...
The bank you own has the following balance sheet: Assets Liabilities Reserves $150 million Deposits $1000 million Loan $1050 million Bank Capital $ 200 million If the bank suffers a deposit outflow of $100 million with a required reserve ratio on deposits of 10%, what actions you must take to keep your bank from failing?
Your bank has the following balance sheet: Assets Liabilities Reserves $50 millions.   Checkable deposits $200 million....
Your bank has the following balance sheet: Assets Liabilities Reserves $50 millions.   Checkable deposits $200 million. Securities $50 million    Loans $150 Bank If the required reserve ratio is 20%, what will be the size of this bank (as measured by its total assets or liabilities) after $20 million deposit outflow if it just meets reserve deficiency by borrowing money? $206 million. $180 million $210 million. $188 million.
A bank has the following assets: Reserves of $15 million; Loans of $150 million; and Securities...
A bank has the following assets: Reserves of $15 million; Loans of $150 million; and Securities of $50 million. Their liabilities include Deposits of $150 million; Borrowed funds of $35 million and Bank Capital of $30 million. If the required reserve rate is 10 percent, answer the following: a. What is the amount of excess reserves the bank is currently holding? b. What are the options available to the bank if customers decide to withdraw $10 million in deposits?
Assets:  $200 Reserves; $5000 Short term Bonds; $6000 Long Term Loans Liabilities: $7000 Checkable Deposits; $3000 Fixed...
Assets:  $200 Reserves; $5000 Short term Bonds; $6000 Long Term Loans Liabilities: $7000 Checkable Deposits; $3000 Fixed Rate Borrowings; $1200 Capital What is the maximum amount of write-offs the bank could sustain without becoming insolvent? How do you know? If a bank becomes insolvent what are the two methods the FDIC can use to resolve the problem?
A bank has the following assets: Reserves of $15 million; Loans of $150 million; and Securities...
A bank has the following assets: Reserves of $15 million; Loans of $150 million; and Securities of $50 million. Their liabilities include: Deposits of $150 million; Borrowed funds of $35 million; and Bank capital of $30 million. If the required reserve rate is 10%, what is the amount of excess reserves the bank is currently holding? How do you describe the general financial position of this bank ?
A bank has the following assets: Reserves of $15 million; Loans of $150 million; and Securities...
A bank has the following assets: Reserves of $15 million; Loans of $150 million; and Securities of $50 million. Their liabilities include: Deposits of $150 million; Borrowed funds of $35 million; and Bank capital of $30 million. If the required reserve rate is 10%, 1) what is the amount of excess reserves the bank is currently holding? 2) How do you describe the general financial position of this bank ?
A bank has deposits of $500. It holds reserves of $80. It has purchased government bonds...
A bank has deposits of $500. It holds reserves of $80. It has purchased government bonds worth $60, and made $450 worth of loans. Set up a T-account balance sheet for the bank, with assets and liabilities. What is the bank's net worth? Question 1 options: -$190 $190 -$90 $90 Suppose the Fed conducts an open market purchase by buying $10 million in Treasury bonds from Wakanda Bank. What will the new balance sheet look like after Wakanda Bank converts...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT