FIN100. Week 3 Homework
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FIN100. Week 3 Homework
Chapter 5
1. Assume that GABBY BANK receives two separate primary deposits of $1.2 million each. The bank must keep reserves of 20 percent against its deposits. Prepare a simple balance sheet of assets and liabilities for GABBY BANK immediately after the deposit is received.
ASSETS
LIABILITIES
$480,000
$1.2 million
$1,920,000
$1.2 million
$2.4 million
$2.4 million
2. Assume a financial system has a monetary base of $24.12 million. The required reserves ratio is 7.3 percent and there are no leakages in the system.
a. What is the size of the money multiplier?
mm = 1 / 0.073 = 13.70
b. What will be the system’s money supply?
m1 = mb * mm = 24.12 * 13.70 = $330.44 million
Chapter 6
Assume that in 2013 the Australian dollar was trading at $0.4437, the Mexican peso at $0.2210, and the United Kingdom (British) pound was worth $1.6234.By the year 2014 the U.S. dollar value of an Australian dollar was $0.812, the Mexican peso at $0.0367, and the British pound was twice 2014 Australian dollar. Calculate the percentage appreciation or depreciation of each of these three currencies between last year and this year.
FIN100. Week 3 Homework
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