Money and Banking help

[FFactory0x]

Im getting rocked by money and banking and need help

Fed buys back $500 million worth of T-Bills from Commerce bank through and open market purchase and commerce had 10billion in total loans.

1.If the required reserve ratio were 9%, what are commerce banks total loans outstanding and total reserves after the buyback

2. What is the maximum effect that the FEC buy back would generate? What is multiplier effect and what does it mean?

3. What if you were told Commerce bank had 80 million in excess reserves. How would this change the above

 

[talyn00]

answer your own hw questions

 

[bigrash]

Originally posted by: talyn00
answer your own hw questions

 

[AccruedExpenditure]

I'm going to assume that Commerce Bank had 10 Billion in Loans prebuyback

1.) Total Reserves: 400 Million
Maximum Loans Outstanding 4.44 Billion
2.) It would reduce loans outstanding by 5.6 Billion Dollars
- Multiplier = 11.1
3.) It'd boost Loans outstanding to 5.328 Billion Dollars Total from 4.44 Billion Dollars

I hope you have to show work. Those are the answers, now figure out how I got them.

 

[FFactory0x]

Originally posted by: AccruedExpenditure
I'm going to assume that Commerce Bank had 10 Billion in Loans prebuyback

1.) Total Reserves: 400 Million
Maximum Loans Outstanding 4.44 Billion
2.) It would reduce loans outstanding by 5.6 Billion Dollars
- Multiplier = 11.1
3.) It'd boost Loans outstanding to 5.328 Billion Dollars Total from 4.44 Billion Dollars

yes. 10B prebuyback


And no this isnt homework just extra help questions im doing on my own to get ready for an upcoming test and I suck in finance

 

[farmercal]

Search for answer the way the rest of us do it.