Here again is the balance sheet information for Cipher Bank

Here again is the balance sheet information for Cipher Bank. It will be repeated in future questions to make things a bit easier. Note that you can, and may have to, calculate anything marked with a\"???,\" and anything not included or otherwise calculable $0 Assets Liabilities and Owner\'s Equity Buildings and furniture $900 Cash $80 Commercial paper $500 Deposit in the Fed $320 Checking deposits $2100 Savings deposits $800 Time deposits $200 Borrowing from Bank B $500 Government agency bonds $800 Borrowing from the Fed $1600 Home mortgages $1200 Loan to Bank A $400 Loans to firms $1100 Loans to households $1300 Municipal bonds $1400 US government bonds $600 Other liabilities $1000 Equity $??? Total assets $8600 Total liabilities and owner\'s equity-???

Solution

Answer: -

To Find the value of Equity: -

As per accounting principal for \'Balance Sheet\", \'asset\' should always be equal to \'liabilities\' and \'shareholder\'s equity\'.

Here, \'Total Asset\' is $8600, hence \'Total Liabilities and Equity\' will also be equal to $8600.

With all the values of \'Liabilities and Equity\' side is given except that of Equity, we can calculate \'Equity\' by deducting all the values from $8600 hence we get \'Equity\' = $2400 [=$8600 - $2100 - $800 - $500 - $1600 - $1000].

\'Risk-Adjusted\' Leverage Ratio: -

Equity = $2400 (as calculated above)

Debt or Liability = $6200. [Note: This is arrived at by deducting \'Total Liability and Equity\' from \'Equity\' which is $8600 - $2400 = $6200]

Capital = Debt + Equity = $6200 + $2400 = $8600

Asset Calculation:

Ratios: -