17. When two financial institutions are involved in a transaction both balance sheets are affected. In the example of Wells Fargo and Wachovia, Wells Fargo’s balance will increase in all aspects while the Wachovia balance sheet comes to an end. While Wachovia will receive immediate income from the transaction, Wells Fargo will slowly recuperate that money and more. The source of funds in this transaction is Wells Fargo because as the assets go down to pay for the transaction the liability and equity will go up. Wachovia is the use of funds because as the assets go up from the money made in the transaction the equity and liability of the company goes down.
Chapter 1 Internet Exercise
According to Yahoo Finance, the price per share for IBM is at its highest from March of last year. The total value or market capitalization of IBM is 240.18 billion dollars. On average their daily trading volume is 4,457,770 while their chart trend seems to be rising since November 2008, their lowest point in the last five years. Their highest point in these past 5 years has been as recent as March 5, 2012.
6. Money supply growth is affected by an increase in the reserve requirement ratio by causing an initial injection of funds to multiply by a smaller amount according to Financial Markets and Institutions. In this way the Fed can adjust money supply growth by adjusting the reserve requirement ratio. 9. The Fed uses the open market operations to reduce money supply by selling government securities to government securities dealers. 10. The Fed’s open market operations have a different effect on the money supply than transactions between two depository institutions because they have more control over the value of the money with the open market operations. Two depository institutions control how low the money with the open market operations. Two depository institutions control how low the value gets by increasing...