14.3

Consider a bank that issued loans for $⁢66 million, purchased bonds for $⁢42 million, and held $⁢15 million in reserves in 2017. In addition, savers deposited $⁢118 million in 2017. In 2018, the bank's assets increased by $⁢6 million while the amount of deposits decreased by $⁢21 million. Determine the difference between the bank's net worth in 2017 and 2018. Round your answer to the nearest whole number if necessary

1. (66 + 42 + 15) - 118 5 2. 5 + 6 + 21 32 3. 32-5 27

Consider that a bank holds $⁢5 million in reserves that corresponds to 10% of its assets. The net worth of this bank is $⁢9 million. What is the share of deposits in the sum of liabilities and net worth, assuming that deposits are the only liability

1. 5/10% 50 2. 50 - 9 41 3. (41/50) * 100

Suppose a bank has issued loans for $⁢500 billion, purchased bonds for $⁢150 billion, and holds $⁢210 billion in reserves. Calculate the value of the bank's liabilities if the net worth of the bank is $⁢550 billion

1. 500+150+210 860 2. 860-550 310 3.

Assuming all amounts are in billions, suppose a bank has made $⁢54.0 in loans, has purchased $⁢40.0 in government securities, and has $⁢5.4 in reserves. Furthermore, suppose this bank has $⁢81.4 in deposits. What is the value of this bank's bank capital

1. 54+40+5.4 99.4 2. Next, identify the bank's liabilities. This is equal to the amount of deposits 81.4 3. 99.4-81.4 18

In 2015, the net worth of a bank was $⁢600 billion, and the bank's liabilities were $⁢150 billion. In 2020, the value of customers' deposits in the bank increased by $⁢70 billion, and reserves decreased by $⁢40 billion. Calculate the net worth of the bank in 2020 if other parameters remained constant

1. 600 + 150 750 2. 150 + 70 220 3. 750 - 40 710 4. 710 - 220 490

Consider a bank with $⁢61 million of total assets and $⁢55 million of liabilities in 2017. In 2018, loans decreased by $⁢16 million. Calculate the bank's net worth following this change. Round your answer to the nearest whole number if necessary

1. 61 - 16 45 2. 45-55 -10

A bank holds $⁢80 billion in checking accounts, $⁢140 billion in savings accounts, and $⁢50 billion in reserves. The bank has also issued loans for $⁢150 billion and purchased 0.8 billion bonds, each worth $65

1. 80 + 140 220 2. 0.8 * 65 52 3. 150 + 52 + 50 252 4. 252 - 220 32

In 2014, the net worth of a bank was $⁢850 billion, and the value of customers' deposits was $⁢400 billion. In 2019, the net worth of the bank increased by $⁢155 billion, and the value of savings accounts increased by $⁢190 billion. Calculate the difference in the bank's total assets between 2014 and 2019.

1. 850 + 400 1250 2. 850 + 155 1005 3. 400 + 190 590 4. 1005 + 590 1595 5. 1595 - 1250 345

false

banks always make accurate assumptions about the percentage of potentially "bad" loans out of all issued loans, which always meet the reality in order to attract customers and become prosperous in the long term, a bank should pay out a higher interest to depositors than it charges its borrowers an asset-liability time mismatch is beneficial for banks but disadvantage for its customers a rise in interest rates in a country is always beneficial for banks operating there as they will receive higher loan payments loan diversification is a reliable way to constantly maintain the positive net worth of a bank all categories in the assets section of a bank's balance sheet lead to future interest payments to the bank on a bank's T-account, assets will always equal liabilities it is always the same bank that issues a home loan, charges various handling and processing fees for doing so, and then collects the loan payments the net worth of a bank is the sum of its total assets and total liabilities in the financial market, banks are the only existing financial intermediaries banks, as financial intermediaries, increase transaction costs in the financial market

A bank lending to a variety of customers to reduce risk is called [blank]

diversification

true

loan diversification reduces a bank's exposure to negative events in a specific industry or geographic area a substantial rise in interest rates in a country can cause severe problems for banks operating there one of the reasons banks go bankrupt is inaccurate assumptions about the percentage of loans that will not be repaid on time or will not be repaid at all banks can buy and sell issued home loans in the secondary loan market the price of a specific loan in the secondary loan market is dependent on the ratio of the interest rate the financial institution charged on the original loan and the current interest rate in the economy loans issued to individuals or firms are viewed by a bank as assets banks try to issue loans only to healthy businesses and firms when an individual borrows money from a bank, the money is a liability for the individual and an asset for the bank that issued the loan

Funds that a bank keeps on hand and does not loan out or invest in bonds are called [blank]

reserves

[Blank] means that customers can withdraw a bank's liabilities in the short term while customers repay its assets in the long term

the asset liability time mismatch