--%>
Assignment Help - homework help

Consolidated balance sheets for the chartered banking syste

In the below table you will determine consolidated balance sheets for the chartered banking system & the Bank of Canada. Employ columns 1 through 3 to show how the balance sheets would read after each of transactions a to c is finished. Analyze separately each transaction, beginning in each of case from the figures provided. All of the accounts are in billions of dollars.

828_consolidate balance sheet.png

a. A decline into the discount rate prompts chartered banks to borrow an added $1 billion from the Bank of Canada. Illustrate the new balance-sheet figures in column 1 of each table.
b. Bank of Canada sells $3 billion into the securities to members of the public, who pay for the bonds with cheques. Illustrates the new balance-sheet figures in column 2 of each table.
c. The Bank of Canada purchase $2 billion of securities through chartered banks. Illustrated the new balance sheet figures in column 3 of each of the table.
d. Now review each of the above three transactions, asking yourself these three questions: (1) What modification, if any, took place in the money supply as a direct and instant result of each transaction? (2) What increase or decrease in chartered banks' reserves occurs in each of transaction? (3) Supposing a desired reserve ratio of 20 percent, what change in the money making potential of the commercial banking system occurred consequently of each transaction?

 

E

Expert

Verified

(a) Column (1) data, top to bottom: Bank Assets will be $34, 60, 60; Liabilities will be $150, 4; Bank of Canada Assets will be $60, 4; Liabilities will be$34, 3, 27.

(b) Column (2) data: Bank Assets =$30, 60, 60;  Liabilities= $147, 3; Bank of Canada Assets= $57, 3, 30, 3, 27.

(c) Column (3) data (top to bottom)=  $35; $58; $60; $150; $3; (Bank of Canada) $62; $3; $35; $3; $27.

(d) (d1) Money supply (demand deposits) directly changes simply in (b), where it reduce by $3 billion; (d2) See balance sheets; (d3) Money-creating potential of the banking system enhanced through $5 billion in (a); decreases through $12 billion in (b) (not by $15 billion—the writing of $3 billion of cheques through the public to purchase bonds drop demand deposits by $3 billion, therefore freeing $0.6 billion of reserves.  Three billion dollars minus $0.6 billion equal $2.4 billion of decreased reserves, and this multiplied through the monetary multiplier of 5 equals $12 billion); and enhanced by $10 billion in (c).

   Related Questions in Finance Basics

  • Q : Question based on imposesing tax Given

    Given equations describe market for widgets                         Demand: P = 10 - Q Supply: P = Q - 4

    Q : Explain computing of payback period How

    How do we compute the payback period for proposed capital budgeting project? What are the basic criticisms of the payback method? We compute the payback period for proposed project through adding a project's positive cash flows, one period at t

    		•
  • Q : Portfolio Analysis And Management My

    My Assignment is writing a Three page paper including executive Summary and investing 1million Dollars in Stocks, Bonds and Mutual Funds and Other Assets and Recording Each Investments made Every Friday of the week, Beginning On September 7th to October 30 on An excel spreadsheet which has been crea

    		•
  • Q : Government requirements imposed on

    Describe some of the government requirements imposed onto a public corporation which are not imposed on a private, intimately held corporation? Public corporations ought to submit audited financial statements to the government for release to the

    		•
  • Q : What is Debt Service Debt Service : The

    Debt Service: The amount (sum) of money needed to pay interest on exceptional bonds and the principal of maturing bonds.

    		•
  • Q : Define Control Sections Control

    Control Sections: The sections of the Budget Act (that is, 1.00 to the end) giving specific controls on the appropriations itemized in the Section 2.00 of Budget Act.

    		•
  • Q : Explain Transfers Transfers : As

    Transfers: As employed in Schedule 10Rs and fund situation statements, transfers replicate the movement of resources from one fund to the other based on statutory authorization or particular legislative transfer appropriation authority.

    		•
  • Q : Chartered banks Normal 0 false false

    Normal 0 false false

  • Q : Compare diversifiable and non

    Compare diversifiable and non diversifiable risk. Which do you think is more significant to financial managers within a business firms?Diversifiable risk can be dealt along with by, of course, diversifying. Generally non diversifiable risk is co

    		•
  • Q : Formula for the payment required for a

    Normal 0 false false

    		•