Problem 1. The administration of the U.S. monetary system is the responsibility of the Federal Reserve System (The Fed). Midtown Mercantile Bank is expanding its business holdings.
Write a 250-word response explaining how the Fed's role affects and limits Mercantile's expansion plans. Be sure to address the following in your response:
- Explain how the Fed affects the monetary policy.
- Define the monetary policy.
- Identify the discount rate.
- Identify the open market committee.
Then answer the following question:
- Does the Fed do an adequate job of administering U.S. monetary policy? Why or why not?
Problem 2. Consider the following scenario:
The East Coast Bank Holding Corporation is reviewing sources of capital funds needed to fuel bank business expansion.
Write 250 words identifying and explaining the primary sources of capital funds available to East Coast. Be sure to include the following in your response:
- Equity stock
- Capital notes
- Paid in Capital
- Retained earnings
Considering the sources of funds available to East Coast Bank Holding Corporation, which of these funds do you feel is more significant in determining the value of a bank?