Assets1. A share in a publicly traded company2. A $5 bill3. The funds in a money market account4. Your houseSelect the assets in order of their liquidity, from most liquid to least liquid.

Cash can be used immediately used as a medium of exchange, so a $5 bill is the most liquid asset. A…

Answered: Assets 1. A share in a publicly traded…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter25: Money, Banking, And The Federal Reserve System

Section: Chapter Questions

Problem 4P

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You are getting married and are unhappy with your present bank. Discuss how you should go about choosing a new bank and opening an account. Consider the factors that are important to you in selecting a bank – such as the type and ownership of accounts (individual or joint) and bank fees and charges, among others.
A bank that has liabilities of $180 billion and a net worth of $20 billion must have
First National Bank Assets Liabilities and Net Worth US Treasury Bonds $450,000 Net Worth $500,000 Reserves (Cash) $175,000 Checkable Deposits $250,000 Loans $125,000 Second National Bank Assets Liabilities and Net Worth US Treasury Bonds $100,000 Net Worth $250,000 Reserves (Cash) $250,000 Checkable Deposits $100,000 Third National Bank Liabilities and Net Worth Assets US Treasury Bonds $900,000 Net Worth $1,000,000 Reserves (Cash) $350,000 Checkable Deposits $500,000 Loans $250,000 The required reserve ratio is 25% for all banks. Second National Bank is capable of loaning $ (Do NOT enter the '$' in your response. Enter a whole dollar amount; do NOT enter cents.) to its customers. Blank 1
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First National Bank Assets Liabilities and Net Worth US Treasury Bonds $450,000 Net Worth $500,000 Reserves (Cash) $175,000 Checkable Deposits $250,000 Loans $125,000 Second National Bank Assets Liabilities and Net Worth US Treasury Bonds $100,000 Net Worth $250,000 Reserves (Cash) $250,000 Checkable Deposits $100,000 Third National Bank Assets Liabilities and Net Worth US Treasury Bonds $900,000 Net Worth $1,000,000 Reserves (Cash) $350,000 Checkable Deposits $500,000 Loans $250,000The Required Reserve Ratio is 25% for all banks. Assuming that all the customers that have outstanding loans have used all of those additional funds to invest in new machinery for their businesses (therefore, the amount of Checkable Deposits is the true liability the bank has to its customers), then $_____________ is the resulting change to the loan creating potential of the whole system (these three banks) as a result of Second National Bank customers depositing an additional $400,000 in their Checkable…
A bank that wishes to reduce its credit risk could: A. Sell risky loans from its loan portfolio B. Enter into a repurchase agreement O. Buy a credit default swap D. Sell a credit default swap E. Both A and C will reduce credit risk
Johanna is an institutional investor who is looking to “park” some of her investment funds for a short time. How would you explain to Johanna why money market instruments might be useful for her?
When I expect interest rates to fall in the near future, I will be willing to Buy bonds at current prices. Buy bonds, but only if their price falls. Sell bonds now. Put my money in savings account rather than buy bonds.
As part of the wave of “deregulation” of financial markets in the 1980s, banking laws were changed to allow commercial banks in the United States to offer relatively liquid savings accounts that could pay a market interest rate. What were these accounts called? How did they work?
Reserves $ 100 Checkable Deposits 1,000 300 Loans (to customers) Property Securities (owned) Stock Shares 400 300 100 Refer to the accompanying table of information for the Moolah Bank. Assume that the listed amounts constitute this bank's complete set of accounts. Moolah's assets are $1,100. liabilities are $1,100. net worth is $300. profit is $1,000.
three ways in which banks use to make profit

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Assets 1. A share in a publicly traded company 2. A $5 bill 3. The funds in a money market account 4. Your house Select the assets in order of their liquidity, from most liquid to least liquid.