Assume that Bank A receives a primary deposit of $100,000 and that it must keep reserves of 10 percent against deposits.
a. Prepare a simple balance sheet of assets and liabilities for the bank immediately after the deposit is received.
b. Assume Bank A makes a loan in the amount that can be ?safely lent.? Show what the bank?s balance sheet of assets and liabilities would look like immediately after the loan.
c. Assume that a check in the amount of the ?derivative deposit? created in Part b was written and sent to another bank. Show what Bank A?s (the lending bank?s) balance sheet of assets and liabilities would look like after the check is written.?????
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