Calculate the average and expected selling price

Assignment Help Corporate Finance

Reference no: EM1347658

Determine the size of the M1 money supply using the following information. Currency plus traveler's checks $25 million, Negotiable CDs $10 million, Demand deposits $13 million Other checkable deposits $12 million

Following are components of the M1 money supply at the end of last year. What will be the size of the M1 money supply at the end of next year if currency grows by 10 percent, demand deposits grow by 5 percent, other checkable deposits grow by 8 percent, and the amount of traveler's checks stays the same?

Currency $700 billion
Demand deposits $300 billion
Other checkable deposits $300 billion
Traveler's checks $10 billion

Assume that a country estimates its M1 money supply at $20 million. A broader measure of the money supply, M2, is $50 million. The country's gross domestic product is $100 million. Production or real output for the country is 500,000 units or products.

a. Determine the velocity of money based on the M1 money supply.
b. Determine the velocity of money based on the M2 money supply.
c. Determine the average price for the real output

The One Product economy, which produces and sells only personal computers (PCs), expects that it can sell 500 more, or 12,500 PCs, next year. Nominal GDP was $20 million this year, and the money supply was $7 million. The central bank for the One Product economy plans to increase the money supply by 10 percent next year.

a. What was the average selling price for the personal computers this year?
b. What is the expected average selling price next year for personal computers if the velocity of money remains at this year's turnover rate? What percentage change in price level is expected to occur?
c. If the objective is to keep the price level the same next year (i.e., no inflation), what percentage increase in the money supply should the central bank plan for?
d. How would your answer in (c) change if the velocity of money is expected to be three times next year? What is it now?

The following three one-year 'discount' loans are available to you:
Loan A: $120,000 at a 7 percent discount rate
Loan B: $110,000 at a 6 percent discount rate
Loan C: $130,000 at a 6.5 percent discount rate

a. Determine the dollar amount of interest you would pay on each loan and indicate the amount of net proceeds each loan would provide. Which loan would provide you with the most upfront money when the loan takes place?
b. Calculate the percent interest rate or effective cost of each loan. Which one has the lowest cost?

Following are selected balance sheet accounts for Third State Bank: vault cash _ $2 million; U.S. government securities _ $5 million; demand deposits _ $13 million; non transactional accounts _ $20 million; cash items in process of collection _$4 million; loans to individuals _$7 million; loans secured by real estate _$9 million; federal funds purchased _$4 million; and bank premises _$11 million.

a. From these accounts, select only the asset accounts and calculate the bank's total assets.
b. Calculate the total liabilities for Third State Bank.
c. Based on the totals for assets and liabilities, determine the
amount in the owners' capital account.

Let's assume that you have been asked to calculate risk-based capital ratios for a bank with the following accounts:
Cash _ $5 million
Government securities _ $7 million
Mortgage loans _ $30 million
Other loans _ $50 million
Fixed assets _ $10 million
Intangible assets _ $4 million
Loan-loss reserves _ $5 million
Owners' equity _ $5 million
Trust-preferred securities _ $3 million

Cash assets and government securities are not considered risky. Loans secured by real estate have a 50 percent weighting factor. All other loans have a 100 percent weighting factor in terms of riskiness.

a. Calculate the equity capital ratio.
b. Calculate the Tier 1 Ratio using risk-adjusted assets.
c. Calculate the Total Capital (Tier 1 plus Tier 2) Ratio using risk-adjusted assets.

This problem focuses on bank capital management and various capital ratio measures. Following are recent balance sheet accounts for Prime First National Bank. Cash assets $ 17 million Demand deposits $50 million Loans secured by Time & savings
real estate 40 deposits 66
Commercial loans 45 Federal funds
purchased 15
Government Trust-preferred
securities owned 16 securities 2
Goodwill 5
Bank fixed assets 15 Owners' capital 5
Total assets $138 million Total liabilities $138 million
and owners'
capital
All amounts are in millions of dollars.

Note: The bank has loan-loss reserves of $10 million. The real estate
and commercial loans shown on the balance sheet are net of the
loan-loss reserves.

a. Calculate the equity capital ratio. How could the bank increase its equity capital ratio?
b. Risk-adjusted assets are estimated using the following weightings process: cash and government securities _.00; real estate loans _.50; commercial and other loans _ 1.00.
Calculate the risk-adjusted assets amount for the bank.
c. Calculate the Tier 1 Ratio based on the information provided and the risk-adjusted assets estimate from Part b.
d. Calculate the Total Capital (Tier 1 plus Tier 2) Ratio based on the information provided and the risk-adjusted assets estimate from Part b.
e. What actions could the bank management team take to improve the bank's Tier 1 and Total Capital ratios?

Reference no: EM1347658

Questions Cloud

Better software tool internet explorer or mozilla firefox : There are several Internet browsers available today, and many people select which to use without giving it consideration. Explain which is better software tool: Internet Explorer, Mozilla Firefox, or Google Chrome?

Sales promotions tools - consumer incentive : Sales Promotions offer consumers an incentive to buy and name at least four different types of sales promotion tools

Roehler industrial direct materials purchases budget : Roehler Industrial has estimated that production for the next five quarters will be: Make quarterly direct materials purchases budgets for Roehler Industrial for 2011.

Personal goals and vision, and career aspirations : How does a Business degree enhance the strengths and mitigate the weaknesses of employees and how does it align to personal goals and vision, and career aspirations?

Calculate the average and expected selling price : Calculate size of the M1 money supply using the following data. Currency plus traveler's checks 25 million dollar, Negotiable CDs 10 million dollar and Demand deposits of 13 million dollar.

Nucor corporation- the art of motivation : Nucor Corporation: The Art of Motivation - explain what does Nucor's approach to managing its people require of managers

Imperial data devices flexible budget : Expected manufacturing costs for Imperial Data Devices are as follows: Estimate manufacturing costs for production levels of 11,000 units, 13,500 units, and 16,000 units per month.

What is his new linear velocity : Two large metal plates of area 1.20m2 face each other. They are 4.8cm apart and have equal but opposite charges on their inner surfaces. The strength of the electric field between them is 63N/C.what is the magnitude of the charge on each plate.

Illustrate what are monthly fixed costs-quasi-fixed costs : Illustrate what are monthly fixed costs, quasi-fixed costs, and variable cost for Exquisite Portraits Inc.

User Account

All Pages