Consider the following balance sheet for the First National Bank (M stands for millions of dollars; assume the bank holds no assets or liabilities except for those listed):
Loans ? ? ? ? ? ? ? $215M
Checking Deposits????? $200M
Assume that the reserve requirement (R) is 5%.
Find E, the percentage of deposits that the bank is holding as ?excess reserves.?
Show your work.
If $100M worth of the bank?s loans default, show the bank?s balance sheet immediately?after?the default. Assume nothing has been done to try to offset the default.
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