Prepare simple balance sheet of assets and liabilities

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Reference no: EM13847105

Assume that Bank A receives a primary deposit of $100,000 and that it must keep reserves of 10 percent against deposits.

a. Prepare a simple balance sheet of assets and liabilities for the bank immediately after the deposit is received.

b. Assume Bank A makes a loan in the amount that can be “safely lent.” Show what the bank’s balance sheet of assets and liabilities would look like immediately after the loan.

c. Assume that a check in the amount of the “derivative deposit” created in Part b was written and sent to another bank. Show what Bank A’s (the lending bank’s) balance sheet of assets and liabilities would look like after the check is written.

Reference no: EM13847105

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