What would happen to the profit of this bank

Assignment Help Microeconomics

Reference no: EM13936180

The Seedy Bank
Assets Liabilities + Owner's Equity
Reserves $1 Checking Deposits $5
Short-term
Securities $10 Variable Rate CDs $15
Long-term Long-term CDs $5
Securities $19 Bank Capital $5

a) Suppose the reserve-requirement is 25% and this bank decides to comply by a marketing campaign. If the campaign increases checking deposits, how much additional funds do they need to raise to satisfy the requirement? If the campaign increases variable rate CDs, how much additional funds do they need to raise to satisfy the requirement? Label clearly.

b) Based on the given above balance sheet, if interest rates fell from 5% to 3%, what would happen to the profit of this bank? [Show a calculation.]

c) If this bank wanted to completely insulate its profit from interest rate changes by a marketing campaign to raise funds, what category of liabilities, if any, should they target? Briefly explain

Reference no: EM13936180

Questions Cloud

What was brians net profit on the put option : Assume Brian immediately sold off the Canadian dollars received when the option was exercised. Also assume that there are 50 000 units in a Canadian dollar option. What was Brian's net profit on the put option?

Design, implement and evaluate a mobile/web : Interpret the broad range of business activities that are supported or enabled by Mobile/Web technologies and be able to advise organisations on the appropriate use of Mobile and Web Technologies.

Choose a planning approach and describe an ideal situation : Part of being effective in participation in program planning is being comfortable with using different approaches in different situations. Choose a planning approach and describe an ideal situation and a least ideal situation for its use. Strateg..

Type of organizational culture-market oriented : 1) what type of organizational culture? Market oriented? 2) what type of org structure, organizational chart?

What would happen to the profit of this bank : Suppose the reserve-requirement is 25% and this bank decides to comply by a marketing campaign. If the campaign increases checking deposits, how much additional funds do they need to raise to satisfy the requirement?

Write a test harness for these classes : Write an interface IClown that defines one method Honk(). Modify the TallGuyClown class to implement that interface so that calling Honk() will display a MessageBox (as above) that says "Honk my horn!". Add a property FunnyThingIHave to the interf..

Relationship between obesity and lack of exercise : Clearly there is a relationship between obesity and lack of exercise and poor diet. In addition, most philosophers throughout the history of the world have agreed that happiness will, at some point, require meaningful relationships with other hum..

Determine a set of heuristic usability principles : Note: You have to describe about Heuristic usability principles in this part using your own words and in this part you can use the reference. I have upload a PDF file for your information which will be mostly enough to for this part or if you know..

What are the major effects of urban bias : Generally speaking, higher income countries tend to have less income inequality than low income countries, however this does not always hold true. What could cause a low income country to have low income inequality?

User Account

All Pages