Which of the following is not an example of a digital transaction?

Consider the following simplified balance sheet of a commercial bank: ASSETS LIABILITIES Vault cash $200 $3500 Deposits Deposits

andrezito [222]

Answer:

Check the following calculations

Explanation:

(a)

Actual Reserves = Vault cash + Deposits at the Federal Reserve

Actual Reserves = $200 + $300

Actual Reserves = $500

The actual reserves are $500.

Calculate Required Reserves -

Required Reserves = Deposits * Required reserve ratio

Required Reserves = $3500 * 0.10 = $350

The required reserves are $350.

Calculate Excess Reserves -

Excess reserves = Actual reserves - Required Reserves

Excess reserves = $500 - $350 = $150

The Excess reserves are $150.

(b)

A bank can increase the amount of its loan by the amount of excess reserves it held.

This bank has excess reserves of $150.

So, this bank can increase its loans by $150.

(c)

Calculate Money multiplier -

Money multiplier = 1/Required reserve ratio = 1/0.10 = 10

The money multiplier is equal to 10.

(d)

Calculate total expansion of loan by entire banking system -

Total expansion = Increase in loan by individual bank * Money multiplier

Total expansion = $150 * 10 = $1,500

The entire banking system can expand their loans by $1,500.

(e)

The new wealth directly created from this expansion of deposits is equal to the quantum of expansion in deposits.

The deposits has expanded by $1,500.

So, new wealth directly created from this expansion of deposits is $1,500.

5 0

3 years ago

When referring to student loans what is a grace period

Anestetic [448]

It is a period of time that the loaning company gives you before you have to start repaying the debt.
For instance: After graduating from college, you must start the payments to pay back your loan 3 months after graduation.

4 0

3 years ago

In January 2017, Domingo, Inc., acquired 20 percent of the outstanding common stock of Martes, Inc., for $889,000. This investme

jasenka [17]

Answer:

$923,450

Explanation:

The question is to calculate the equity method balance of Domingo's investment in Martes. Inc at December 31,2015

Step 1: Determine the amortization of patents

Particulars Amount

Martes Inc Assets' Book Value $4,808,000

Subtract: Liabilities ($968,000)

Martes Inc Net Assets Book Value $3,840,000

20% Voting Stock Book Value $768,000

(20% of $3,840,000)

Subtract: Purchase cost of the 20% ($889,000)

Excess of Cost over book value $121,000

Patent (the excess above) $121,000

Amortization of the patent in 10 years = $121,000/10 years = $12,100

Step 2: Calculate the Equity Investment of Domingo Inc

Particulars Amount

Cost of Investment $889,000

Income accrued 2017 (0.2 x $225,000) $45,000

Subtract: Declared dividend (0.2 x $104,000) ($20,800)

Income Accrued 2018 (0.2 x $276,250) $55,250

Subtract: Patent Amortization ($12,100)

Subtract: Dividend declared 2018 (0.2 x $104,000) ($20,800)

Subtract: Patent Amortization ($12,100)

Domingo Inc's Investment in Martes Inc $923,450

6 0

4 years ago

What role have public speeches served in ancient societies?

Yuri [45]

It was an art form in Egypt as well as in Greece<span />

8 0

4 years ago

CAPM and Valuation. You are considering acquiring a firm that you believe can generate expected cash flows of $10,000 a year for

UkoKoshka [18]

Answer:

The value of the firm or worth of the firm is $147058.82 rounded off to 2 decimal places

Explanation:

We first need to calculate the required rate of return for this firm that will be used as the discount rate in the valuation of the firm using the discounted cash flow methods.

Using the CAPM we can calculate the required rate of return as,

r = rRF + Beta * (rM - rRF)

Where,

rRF is the risk free rate
rM is the return on Market

So,

r = 0.04 + 0.4 * (0.11 - 0.04)

r = 0.068 or 6.8%

As the cash flows the firm can generate are expected to remain constant through out and they are generated after equal interval of time, this can be treated as a perpetuity.

The present value of a perpetuity is calculated as follows,

Present Value of perpetuity = Cash Flow / r

Present value of perpetuity = 10000 / 0.068

Present value of perpetuity = $147058.8235

So, the value of the firm or worth of the firm is $147058.82 rounded off to 2 decimal places

3 0

4 years ago