FIN 100 Week 2 Homework

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Question 1

As the executive of a bank or thrift institution you are faced with an intense seasonal demand for loans. Assuming that your loanable funds are inadequate to take care of the demand, how might your Reserve Bank help you with this problem?

 

Provide loans to depositories when   additional funds are needed

 

Approve new loans

 

Provide oversight for the issuing of new   loans arrangements

 

Monitor and manage new loan agreements

Question 2

Assume that Banc One receives a primary deposit of $1 million. The bank must keep reserves of 20 percent against its deposits. Prepare a simple balance sheet of assets and liabilities for Banc One immediately after the deposit is received.

 

 

ASSETS

LIABILITIES

 

Reserves

$1 Million

Deposits

$1 Million

 

 

ASSETS

LIABILITIES

 

Reserves

$800,000
$200,000

Deposits

$1 Million

 

 

ASSETS

LIABILITIES

 

Reserves

$1 Million

Deposits

$800,000
$200,000

Question 3

Assume a financial system has a monetary base of $25 million. The required reserves ratio is 10 percent, and there are no leakages in the system. What is the size of the money multiplier?

 

15.00

 

11.00

 

.999

 

10.00

Question 4

Assume a financial system has a monetary base of $25 million. The required reserves ratio is 10 percent, and there are no leakages in the system. What will be the system’s money supply?

 

$300 Million

 

$200 Million

 

$250 Million

 

$275 Million