Unformatted text preview: Assets Liabilities Bank Reserves $70 million Deposits $950 million T-securities $200 million Equity $100 million Loans $780 million The bank will have reserve shortage. The bank is now required to hold $95 million and faces a shortage of $25 million. b. List four different ways that the bank can use to replenish its reserves. (i) The bank can sell T-securities (Sale or a Repurchase Agreement) (ii) The bank can use the discount window at the Fed. (iii) The bank can borrow funds from other banks in the federal funds market. (iv) The bank can sell some loans (v) The bank can offer attractive interest rates on CD and improves its reserves. 4. Let us say that the Bank sells just enough T-securities to bring reserves to the legal limits. What will the size of the sale of T-securities? Write the new balance sheet Assets Liabilities Bank Reserves $95 million Deposits $950 million T-securities $175 million Equity $100 million Loans $780 million...
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- Spring '08
- Monetary Policy, Federal Reserve System, Liabilities Bank Reserves, Assets Liabilities Bank