(1) The Madoff bank has the following balance sheet:

Assets                                                    Liabilities
Reserves $75 million                            Deposits $500 million
Loans $525 million                               Bank Capital $100 million
Total Assets $600 million                   Total Liabilities $600 million

If the bank suffers a deposit outflow of $50 million and the required reserve ratio on deposits is 10%, what actions should the bank take?

(2)
a. Stanford bank started its first day of operations with $10 million in capital. A total of $100 million in checkable deposits is received. The bank makes a $25 million commercial loan and another $25 million in mortgage loans. If required reserves are 8%, what does the bank balance sheet look like?

b. Suppose that Stanford bank decides to invest $45 million in 30-day T-bills. The T-bills are currently trading at $4,986.70 (including commissions) for a $5,000 face value instrument. How many do they purchase? What does Stanford bank’s balance sheet now looks like?

(3) If a bank is falling short of meeting its capital requirements by $1 million, what three things can it do to correct the situation?

(1) The Madoff bank has the following balance sheet: &nbsp; &nbsp...

(1) The Madoff bank has the following balance sheet: &nbsp...