You have just been appointed Managing Director of MCM Bank. To facilitate your work, the...
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Finance
You have just been appointed Managing Director of MCM Bank. To facilitate your work, the board of Directors have just mobilized a deposit of K100m as your initial resources for lending purposes. The market survey shows that 60% of your monthly loans are re-deposited in your bank by the end of each month. The bank of Zambia reserve requirements for deposits are 10%.
Your loan proposals are approved by your board, and immediately disbursed at the beginning of each month.
On the basis of this deposit (K100m), use the t-account(s) to show your balance sheet that meets shareholders expectations of maximum possible profit at the end of 2 months in office (state all assumptions).
Calculate the money multiplier
By how much will the money supply increase if MCM bank decided not to hold any idle excess reserves.
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