Suppose the fed conducts an open market purchase by buying $10 million in treasury bonds from acme bank. sketch out the balance sheet changes that will occur as acme converts the bond sale proceeds to new loans. the initial acme bank balance sheet contains the following information: assets – reserves 30, bonds 50, and loans 50; liabilities – deposits 100 and equity 30.

2. (a) suppose the fed decides it needs to pursue an expansionary policy. assume the reserve requirement is 20 percent, and there are no excess reserves. show how the fed would increase the money supply by $2 million through open market operations.

(b) some individuals have suggested raising the required reserve ratio for banks to 100 percent:

(i) what could the money multiplier be if this change were made?

(ii) what effect would such a change have on the money supply?

(iii) how could that effect be offset (in ii above)?

The framers of the us constitution created a system of government that established branches of government set forth the powers of such a branches and placed limits on those powers what are the benefits of such a system? are there any problems associated with such a system?

Anewspaper boy is trying to perfect his business in order to maximize the money he can save for a new car. daily paper sales are normally distributed, with a mean of 100 and standard deviation of 10. he sells papers for $0.50 and pays $0.30 for them. unsold papers are trashed with no salvage value. how many papers should he order each day and what % of the time will he experience a stockout? are there any drawbacks to the order size proposed and how could the boy address such issues?

If a firm plans to issue new stock, flotation costs (investment bankers' fees) should not be ignored. there are two approaches to use to account for flotation costs. the first approach is to add the sum of flotation costs for the debt, preferred, and common stock and add them to the initial investment cost. because the investment cost is increased, the project's expected return is reduced so it may not meet the firm's hurdle rate for acceptance of the project. the second approach involves adjusting the cost of common equity as follows: . the difference between the flotation-adjusted cost of equity and the cost of equity calculated without the flotation adjustment represents the flotation cost adjustment. quantitative problem: barton industries expects next year's annual dividend, d1, to be $1.90 and it expects dividends to grow at a constant rate g = 4.3%. the firm's current common stock price, p0, is $22.00. if it needs to issue new common stock, the firm will encounter a 6% flotation cost, f. assume that the cost of equity calculated without the flotation adjustment is 12% and the cost of old common equity is 11.5%. what is the flotation cost adjustment that must be added to its cost of retaine