A simple banking model. A bank raises funds by accepting deposits D in order to make loans L. The central bank requires that the bank hold a minimum…

Please show all work.

Please show all work.

Please show all work.

Answer:

A simple banking model. A bank raises funds by accepting deposits D in order to makeloans L. The central bank requires that the bank hold a minimum quantity of reserves R inproportion to its deposits:R = PD,(1)where p is the required reserve ratio. You should assume that the bank does not hold excessreserves and has no capital. The bank is competitive and takes the lending rate ry and thedeposit rate ro as given. The supply of deposits is perfectly elastic at ro. The bank choosesa quantity of deposits to accept, loans to make, and reserves to hold in order to maximize itsprofit.a)(3 points) Solve the bank’s profit maximization problem to find the equilibrium relation-ship between the deposit rate ro, the lending rate rL, and the required reserve ratio p.Show your work.b)(4 points) Suppose that a borrower uses borrowed funds from the bank to purchases aninvestment good / so that I = L. With certainty, the investment good generates incomefor the borrower according to the function:f(1) = 500 x 705.(2)Suppose that the deposit rate is ro = 0.036 and the required reserve ratio is p = 0.1. Ifthe borrower seeks to maximize profit given by:profit (L, I) = f (1) – (1 + rL)L.(3)then what is the quantity of investment / that the borrower will choose to undertake?Show your work.

Show more

Calculate Your Essay Price
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more