Find the maximum loan the bank can extend

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Reference no: EM1370658

Assume the Required Reserve Ratio (RRR) is 10% and the balance sheet of the People's National Bank looks like the accompanying example:

ASSETS LIABILITIES
Vault Cash- $20,000 Checking Deposits-$200,000
Deposits at Fed-$30,000 Net Worth-$15,000
Securities-$45,000
Loans-$120,000

What is the maximum loan the bank can extend? Indicate how the bank's balance sheet would be altered if it extended this loan (show the new T-account). Suppose that the required reserves were 20 percent. If this were the case, would the bank be in a position to extend any additional loans? Does the bank currently have any excess reserves?

Reference no: EM1370658

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