Suppose the required reserve ratio for the banking system is 25%. Answer the following questions based on the balance sheet of Lafayette Bank:
Lafayette Bank
Assets Liabilities
Cash in the vault 60,000
Deposits 500,000
Deposits at the central bank 100,000
Borrowing from the central bank 70,000
Loans 800,000
Borrowing from other banks 400,000
Securities 100,000
Other liabilities 100,000
Other 30,000
Stockholders' equity 20,000
a.Calculate the level of excess reserves for Lafayette Bank.
b.Determine the largest amount of a deposit outflow this bank could handle without having to acquire more funds.
c.Explain the options for acquiring more funds in the short-run. Be sure to evaluate each on a "costs" basis.