identify and explain three in main task involved in project cost management.
Question One
Below is the balance sheet of Rosike Bank. Use it to answer the questions that follow. Assume the bank’s required reserve ratio is 12%.
Rosike Bank’s Balance Sheet
Assets Liabilities/Equity
Reserves GH¢150,000 Demand Deposits GH¢1,500,000
Loans GH¢850,000 Shareholders’ Equity GH¢550,000
Securities GH¢400,000
Fixed Assets GH¢650,000
GH¢2,050,000 GH¢2,050,000
Is the bank over or under reserved and what is the amount?
What is the maximum amount by which the bank can increase money supply by creating deposits through loans?
Suppose that a loan, in the amount of the excess reserves found in b), is made to Alfred. What effect does this transaction have on the bank’s balance sheet?
Suppose that Alfred immediately spends all of his loan by writing a cheque to his psychologist, Freda Johnson, who deposits it in her bank account, which happens to also be at the Rosike Bank. What effect do these transactions have on the bank’s balance sheet?
Now, is Rosike Bank over or under reserved? If so, by how much?
Suppose the bank experiences an outflow of GHC80,000, what type of problem can this outflow cause to the bank? What is the minimum amount the Bank has to convert into reserves following the deposit outflow.
In what four ways can the problem identified in f) above be solved? Show how each affects the balance sheet of Rosike Bank.
Question Two
In what ways do sufficient reserves (excess reserves) and capital benefit financial institutions? Enumerate any four benefits each.
Examine any four strategies that financial managers use to manage their credit risk.