Banks own and owe several different types of assets and liabilities. For various reasons, banks prefer certain assets and liabilities over others. The following questions distinguish among different types of bank assets and liabilities.
2.1. Consider the following assets and liabilities:
I. Discount loans
II. U.S. government securities
III. Secondary reserves
IV. Small time deposits
V. Commercial loans
VI. Savings accounts
Bank liabilities include:
0 A II, III, and V only
0 B II, III, and V only
0 C I, IV, and VI only
0 D I, III, and V only
0 E I, II, IV, and VI only
2.2. Which of the following correctly orders hank assets from lowest to highest interest rates paid to the bank?
A. Real estate bans, reserves, and U.S. government securities
B. Vault cash, docount loans, and state and laal securities
C. Small time deposits, large time deposits, and secures
D. checkable daps., savings deposits, and large time degas.
E. RPSerVeS, U.S. govemment secwitles, and consumer loans
Consider the balance sheet for River City Bank below. Use the information in the balance sheet to answer the following question. Assume the reserve requirement is 100/0 on checkable deposits.
River City Bank
Assets Liabilities
Reserves Securities Loans $7,000 $3,000 $210,000 Checkable deposits Nontransactions deposits
Capital $70,000
$140,000
5.1. What is River City Bank's capital?
Consider the balance sheet for River City Bank below. Use the information in the balance sheet to answer the following question. Assume the reserve requirement is 10% on checkable deposits.
River City Bank
Assets Liabilities
Reserves Securities Loans $7,000 $3,000 $210,000 Checkable deposits Nontransactions deposits
Capital $70,000
$140,000
5.2. True or False: Based on River City Bank's balance sheet, if the bank experiences a cash withdrawal of $2,000 from a checking account, it must borrow from another bank or the Fed if it wants to maintain the same level of bank capital.
Consider the balance sheet for River City Bank below. Use the information in the balance sheet to answer the following question. Assume the reserve requirement is 10% on checkable deposits.
River City Bank
Assets Liabilities
Reserves $7,000 Checkable deposits $70,000
Securities $3,000 Nontransactions deposits $140,000
Loans $210,000
Capital $
5.3. Why does River City Bank want to maintain a high enough level of capital?
0 A. To acquire assets with the highest possible rate of return and lowest default risk
0 B. To increase the size of its equity multiplier
C. To keep its reserves as high as possible
D. To ensure that shareholders receive a high return on equity
E. To ensure that it can remain solvent