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1. What is the purpose of having a correspondent bank relationship?
2. Discuss the advantages and disadvantages of a bank holding less cash.
Use the following information for questions 3- 4.
Bank Assets
Bank Liabilities
RAC
Cash and Treasury Securities
$ 2,500
Deposits
$ 13,800
$ -
Repurchase Agreements
$ 1,000
Subordinated Debt
$ 250
Municipal Bonds
$ 1,500
Cumulative Preferred Stock
$ 200
Single Family Home Mortgages
$ 2,700
Common Stock
$ 100
Commercial Loans
$ 4,000
Common Stock Surplus
$ 300
Agricultural Loans
Retained Earnings
$ 350
Allowance for Loan Loss
$ (350)
Bank Buildings
$ 2,000
Goodwill
$ 150
Total
$ 15,000
Capital
Requirements
Amount
Tier 1
$ 750
Total Capital
$ 950
Equity Capital
$ 450
3. How much Tier 1 capital does the bank have?
4. How much Tier 2 capital does the bank have?
5. Discuss the TARP Capital Purchase Program.
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