Essay
Consider the balance sheets of Bank A and Bank B.Bank A is in London,Bank B is in New York.The current exchange rate is & pound;1.00 = $2.00.Show the correct balances in each account if a currency trader employed at Bank A buys £50,000 from a currency trader at Bank B for $100,000 using its correspondent relationship with Bank B.
Bank A (London) 000s
| Assets | Liabilities and Equity | |||||
|---|---|---|---|---|---|---|
| OLD | NEW | OLD | NEW | |||
| £ deposit at B | £500 | B's Eurodollar deposit | $850 | |||
| $ deposit at B | $ 1,000 | B's € deposit | £100 | |||
| Cash in the Vault | £200 | Other Liabilities | £300 | |||
| Other Assets | £400 | Owners Equity | £775 | |||
| ----- | ------ | ------- | ------- | |||
| Total Assets | £1,600 | Total Liabilities & Equity | £1,600 | |||
| Assets | Liabilities and Equity | |||||
|---|---|---|---|---|---|---|
| OLD | NEW | OLD | NEW | |||
| Eurodollar Deposit at A | $850 | B's Eurodollar deposit | £500 | |||
| £ deposit at A | £100 | B's € deposit | $1,000 | |||
| Cash in the Vault | $200 | Other Liabilities | $200 | |||
| Other Assets | $1,000 | Owners Equity | $50 | |||
| ----- | ------ | ------- | ------- | |||
| Total Assets | £2,250 | Total Liabilities & Equity | £2,250 | |||
Correct Answer:
Verified
Correct Answer:
Verified
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