Question

refer to the diagrams, in which Ad1 and as1 are the “before

5 Homework Seved Help Save & Exit Sub The balance sheet for ACME Bank is shown below. ACME Bank Balance Sheet1 Liabilities and net worth $ 118,500 Checkable deposits $ 138.000 5 29.500 Stock shares $ 305.000 Property $ 295,000 Suppose the bank decides to invest 60 percent of its excess reserves in short-term securities in order to earn interest. The bank issues a cashier's check to a securities dealer to purchase the securities. The securities dealer deposits the check into an account at a different bank. What will ACME Bank's balance sheet look like after the check has been processed? Fill in the values in the table below. Assume a required reserve ratio of 20 percent. Instructions: Enter your answers as whole numbers ACME Bank Balance Sheet2 Assets Liabilities and net worth Reserves Checkati deposits Loans Stock Shares Securities < Prev 5 of 7 HE Next > Search C O п

Answer 1

Excess reserves = Total reserves - Required reserve

Total reserves = 118,500

Required reserves = 20% * checkable deposit

= 20% * 138000 = 27,600

Excess reserves = 118,500 - 27,600

= $90,900

The bank invests 60% of its excess reserves in securities

Securities = 60% * 90900

= $54540

$54540 worth of securities are bought by the bank

Remaining reserves = 118,000 - 54,540 = 63960

Assets	Liabilities and net worth
Reserves	63960	Checkable deposits	138000
Loans	29500	Stock shares	305000
Securities	54540
Property	295000