Question

My courses Introduction to Insurance and Banking

i. The Central Bank has set a required reserve ratio of 5% for the entire banking system.

ii.There are five (5) Banks in this simple banking system, BANK A, BANK B, BANK C, BANK D and BANK E.

iii. BANK A has an initial deposit of Kshs. 10,000 and makes a provision of 2.5% to retain additional reserves.

iv. A Customer who is advanced money from Bank A keeps aside 5% of the advance for his personal use.

v.Bank B also makes a provision of 5% to retain additional reserves and the Central Bank reverses its required reserve ratio to 10% for the entire banking system.

vi. A Customer who is advanced money by Bank B keeps aside 10% of the advances for personal use.

vii.The government through the Central Bank injects an additional Kshs. 7,000 into Bank C to support the Banking Sector.

viii. Bank C makes a provision of 5% to retain additional reserves.

ix. A Customer who is advanced money by Bank C keeps aside Kshs. 2,000 for personal use.

x.A Customer who is holding cash of Kshs. 3,000 is reluctant to put his money into his bank.

xi. Bank D also makes a provision to retain 10% as additional reserves.

xii.A Customer who is advanced money by Bank D keeps aside 5% for his personal use.

xiii. Bank E makes a provision to retain additional 10% as reserves.



REQUIRED:

(a) Prepare the final balance sheets of the five banks.

(b) Identify with reason in this particular case any four (4) factors that would limit Credit Creation in this Banking system.

Answer 1

Answer:

ask one by plzzzzzzzzzzz.

Explanation:

...........

Answer 2

Answer:

Please ask the questions one by one.