Suppose bank A has the following balance sheet ASSETS LIABILITIES Reserves K50m Deposits K400m Loans k350m Bank capital

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Suppose bank A has the following balance sheet
ASSETS
LIABILITIES
Reserves K50m
Deposits K400m
Loans k350m
Bank capital k100m
securities K100
(a) If the required reserve ratio is 10%, calculate the
following:
(i) required reserves for bank A (1.5 marks)
(ii) Excess reserves for bank A (1.5 marks)
(b) If the bank suffers a deposit outflow of k30 million, using a T
account, show the effect of this deposit outflow on bank ABC’s
balance sheet. (4.5 marks)
(c) With a required reserve ratio of 10%, how much more reserves
are required to meet the legal reserve requirement? (1.5
marks)
(d) Explain any three actions that can be taken to keep the bank
from failing due to the above deposit outflow. (4.5 marks)
(e) Use T accounts to show the effect of each option above on the
balance sheet. (4.5 marks)
(f) Explain the cost of each option above. And what alternative is
recommended for banks to undertake, to avoid a situation where they
have to incur these costs (6 marks)
(g) Given bank A’s the initial balance sheet, with the value for
assets and bank capital-(before the deposit outflow), assume in
addition that the bank has a return on assets of 2%, calculate the
following
(i) Bank A’s equity multiplier (1.5 marks)
(ii) Bank A’s return on equity (1.5 marks)
(h) Suppose there is a problem in the real estate market such that
K120m of the real estate loan for the bank becomes worthless, the
bad loans will now be valued at zero and so they will have to be
written off.
(i) What will be the net worth and implication for the bank? ( 1.5
marks)
(ii) What are banks advised to do to avoid the above case? (1.5
marks