mgt411 assignment soloution

Assignment
Question No 01
Part (A)
Calculate the impact of an increase in desired currency holdings on the money multiplier from
10% to 15% of deposits when the reserve requirement is 10 percent of deposits, and banks’
desired excess reserves are 04 % of deposits.
Assumption:
If the general public held currency Rs. 109 millions and deposit are Rs. 99 millions.
Part (B)
What will be difference in deposits by following a Rs. 3 billion Open Market Purchase
assuming a 5% reserve requirement
Assumptions:
1 No excess reserves are held.
2 There are no changes in the amount of currency held by the public
Question No
A commercial bank has following data:
Total assets valued Rs. 1,000,000
Item Assets Liabilities
Interest rate sensitive 35% 45%
Interest rate non‐sensitive 65% 55%
Initial interest rate 08 % 05%
Interest rate increase 3% both in assets and liability
Required:
What will be the increase / decrease in the amount of net‐profit(interest) due to the interest rate
change? Your answer should be in absolute figures.