Consider the Balance Sheets of Bank a and Bank B

question 49

Essay

Consider the balance sheets of Bank A and Bank B.Bank A is in Milan,Bank B is in New York.The current exchange rate is €1.00 = $1.25.Show the correct balances in each account if a currency trader employed at Bank A buys €100,000 from a currency trader at Bank B for $125,000 using its correspondent relationship with Bank B.

	Assets				Liabilities and Equity
	OLD	NEW			OLD	NEW
€deposit at B	€500			B's Eurodollar deposit	$ 900
$ deposit at B	$ 800			B's €deposit	€220
Cash in the Vault	€200	€200		Other Liabilities	€300	€300
Other Assets	€400	€400		Owners Equity	€500	€500
	-----	------			-------	-------
Total Assets @ €1.00 = $1.25	€1,740			Total Liabilities & Equity @ €1.00 = $1.25	€1,740

Bank B (NYC) 000s

	Assets				Liabilities and Equity
	OLD	NEW			OLD	NEW
Eurodollar Deposit at A	€900			A's euro deposit	$ 500
$ deposit at A	$ 220			A's $ deposit	€800
Cash in the Vault	€200	€200		Other Liabilities	€200	€200
Other Assets	€600	€600		Owners Equity	€350	€350
	-----	------			-------	-------
Total Assets @ €1.00 = $1.25	€1,975			Total Liabilities & Equity @ €1.00 = $1.25	€1,975

---

Definitions:

Basilar Membrane

The basilar membrane is a critical component of the inner ear, situated within the cochlea; it plays a substantial role in the mechanical analysis of sound waves for hearing.

Cochlea

A spiral-shaped cavity in the inner ear, containing the organ responsible for converting sound waves into nerve signals perceived as sound by the brain.

Color Vision Deficiency

A condition where an individual has a decreased ability to distinguish between certain colors, commonly referred to as color blindness.

Color-Blind

The inability to distinguish between certain shades of color, typically red and green.