What would be the cost of the insurance policy

Assignment Help Financial Management

Reference no: EM131901343

1. Angus bank holds no excess reserves but complies with the reserve requirement. The required reserves ratio is 9% and reserves are currently $27 million. Determine the amount of deposits, the reserve shortage created by a deposit outflow of $5 million, and the cost of the reserve shortage if Angus Bank borrows in the federal funds market, assuming the federal funds rate is 0.25%.

2. Excess reserves acta s insurance against deposit outflows. Suppose that on a yearly basis Malcom Bank holds $12 million in excess reserves and $88 million in required reserves. Suppose that Malcom Bank can earn 3.5% on its loans and that the interest paid on total reserves is 0.2%. What would be the cost of the insurance policy?

Reference no: EM131901343

Questions Cloud

Discuss use of binary tree when searching for keys in array : Discuss the use of a binary tree when searching for keys in an array. Discuss the use of a binary tree when searching for keys in a linked list.

How do social classes impact how people interact : How do social classes impact how people interact? How do these impact services and goods within the society?

Framework for monetary policy : How would you defend the position that the Fed should adopt inflation targeting as a framework for monetary policy?

Natural rate of unemployment and the inflation rate : What happens to the natural rate of unemployment and the inflation rate when the real price of oil increases? (Hint: Use WS-PS and also IS-LM-PC models).

What would be the cost of the insurance policy : Suppose that Malcom Bank can earn 3.5% on its loans and that the interest paid on total reserves is 0.2%. What would be the cost of the insurance policy?

Economic expansion or a recession : If you increase the money supply how does that impact Aggregate demand? Would you use this policy during an economic expansion or a recession?

System is worth installing if required rate of return : Calculate the NPV and decide if the system is worth installing if the required rate of return is 10%.

Discuss your thoughts about the frauds : Go online to find five articles: three about Madoff and two about other Ponzi schemes. Type a report of 500 to 1,000 words summarizing the frauds.

What social problems does your agency try to address : What social problems does your agency try to address? Explain how it is a social problem and how it is addressed.

User Account

All Pages