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29 February, 07:30

Consider a bank that has $8,000,000 in deposits and $1,000,000 in reserves. Suppose it lends out $7,200,000. What are the bank's total assets and stockholders' equity? AMY: This bank has $ in assets, and stockholders' equity is $.

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  1. 29 February, 07:39
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    To determine the deposit left after expenses $8,000,000 - $7,200,000 = $800,000

    Banks total asset = $1,000,000 + $800,000 = $1,800,000

    Banks stockholders equity = asset - liabilities

    Since the bank has no liability, then stockholders equity = $1,800,000
  2. 29 February, 07:48
    0
    For finance, leverage means banks can use reserves to purchase assets, thus increasing future returns on investment.

    Consider a bank with $8 million in deposits, and $1 million in reserves. Suppose it lent out $7,2 million,

    Net assets of the bank = $8 million + $1 million = $9 million,

    and shareholder equity $8 million.

    return = 256000/200000 = 128%

    loss in equity = - 520000/200000 = - 260%
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