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

Bank B (NYC) 000s

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

Question

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

Bank B (NYC) 000s

	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

Quizplus · Accepted Answer

The Answer of 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

Bank B (NYC) 000s

	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

Consider the Balance Sheets of Bank a and Bank B