Question

Suppose the bank makes bad loans to the tune of $5m, show and explain why the...

Suppose the bank makes bad loans to the tune of $5m, show and explain why the bad loans will alter your pro forma balance sheet. Briefly explain why Federal regulators may or may not close the bank

Homework Answers

Answer #1

(NPA) is a banking industry term for a ‘bad loan,  for example one that has not been reimbursed inside the specified time, or where the booked installments are financially past due. If it is turned out to be bad loan, you can write off the loan amount by creating the addional reserve into the balance sheet, it will affect the net position of the balancesheet, Bank holds are the money essentials that must be kept close by budgetary establishments so as to meet national bank prerequisites. The bank can't loan the cash yet should keep it in the vault, nearby or at the national bank, so as to meet any huge and startling interest for withdrawals. if Federal regulators found that the bank is not maintaining the regulation then may close the bank.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Imperial Bank has deposits of $150 million and securities of $110m; the bank also makes loans...
Imperial Bank has deposits of $150 million and securities of $110m; the bank also makes loans to its customers Suppose the bank makes bad loans to the tune of $5m, show and explain how the balance sheet will be altered. (5 points) Explain why regulators may or may not close the bank as a result of the bad loans. (5 points) Assuming that the net profit of the bank is $100m, what is the return on equity of the bank?...
Suppose a company is choosing between bank loans and bonds. The interest rate in the bank...
Suppose a company is choosing between bank loans and bonds. The interest rate in the bank loan is 3.5%, and an investment bank predicted that the company will pay close to 4% to issue a bond with the same maturity. In addition, fees are estimated to be higher for the bond issuance than for the bank loan. Explain why this company may still decide to issue the bond rather than borrowing through a bank.
You deposit $3,000 in currency into your checking account at Elmo's Bank, which has no excess...
You deposit $3,000 in currency into your checking account at Elmo's Bank, which has no excess reserves. The required reserve ratio is 20%. a. Use a T-account to show the initial effect of this transaction on Elmo's Bank balance sheet. b. Suppose Elmo's Bank makes the maximum loan it can from the funds you deposited. Use a T-account to show the initial effect of granting the loan on Elmo's Bank balance sheet. c. What is the maximum increase in checking...
Suppose that the First National Bank has the following balance sheet position and that the required...
Suppose that the First National Bank has the following balance sheet position and that the required reserve ratio is 15 percent. Assets Liabilities Reserves $40 million Deposits $200 million Loans $160 million Bank Capital $20 million Securities $20 million What are the bank's a) required reserves and b) excess reserves? If the bank was hit with a deposit outflow of $20 million, would it have to make an adjustment to the balance sheet? Why or why not? If the bank...
Suppose that Big Bucks Bank has the simplified balance sheet shown below. The reserve ratio is...
Suppose that Big Bucks Bank has the simplified balance sheet shown below. The reserve ratio is 10 percent. Instructions: Enter your answers as whole numbers. a. What is the maximum amount of new loans that Big Bucks Bank can make?      $.     Show in columns 1 and 1' how the bank's balance sheet will appear after the bank has lent this additional amount. Assets Liabilities and net worth (1) (2) (1' ) (2' ) Reserves $26,000    $ $ Checkable...
Suppose there is economic contraction. (a) Show and explain how the economic performance will affect the...
Suppose there is economic contraction. (a) Show and explain how the economic performance will affect the prices of assets (bonds); (b) How will the price of assets impact the level of prospective deposits in your bank? Why? (c) Show and explain why the situation will be different during an economic expansion. (a) A customer of First National Bank (FNB) deposits $10,500 with FNB for 10 years. What is the annualized interest rate that the bank must pay if the customer’s...
4. The money supply contraction process Suppose First Main Street Bank, Second Republic Bank, and Third...
4. The money supply contraction process Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 20%. Raphael, a client of First Main Street Bank, purchases $1,500,000 of Treasury bills in an open market sale undertaken by the Fed. Upon receipt of Raphael's check, the Fed subtracts $1,500,000 from First Main Street Bank’s Federal Reserve account, thereby extinguishing the money. Complete the following table to reflect any changes...
The Fed purchases $100,000 worth of bonds from First National Bank. Suppose that the required reserve...
The Fed purchases $100,000 worth of bonds from First National Bank. Suppose that the required reserve ratio is 20 percent. Answer the following questions. Note: You must show all your work for full credit. Briefly explain your answers as well. -What is the maximum amount that First National Bank by itself can lend out? -What is the maximum amount that the banking system as a whole can lend out? -In the real world, why would the total amount of loans...
4. The money creation process Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity...
4. The money creation process Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 10%. The Federal Reserve buys a government bond worth $250,000 from Sean, a customer of First Main Street Bank. He deposits the money into his checking account at First Main Street Bank. Complete the following table to reflect any changes in First Main Street Bank's balance sheet (before the bank makes any new...
(1.) Suppose you are a manager of a bank with the following balance sheet: Assets (in...
(1.) Suppose you are a manager of a bank with the following balance sheet: Assets (in millions) Liabilities (in millions) Reserves $30 Checkable Deposits $200 Securities $150 Time Deposits $600 Loans $820 Borrowings $100 Suppose you are required to hold 10.00% of checkable deposits as reserves with the central bank. If you were faced with an unexpected withdrawal of $30 million from time deposits, would you rather: • I. Draw down $10 million of excess reserves and borrow the remain...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT