Question

In 2011 Osgood Corporation purchased $4 million in 10-year municipal bonds at face value. On December 31, 2013, the bonds had a market value of $3.6 million and Osgood reclassified the bonds from held to maturity to trading securities. Osgood's December 31, 2013, balance sheet and the 2013 income statement would show the following:

Answer 1

When the Fed conducts an open market purchase of Treasury bonds from a bank, it will result in several balance sheet changes for the bank.

Step-by-step explanation:

When the Fed conducts an open market purchase of Treasury bonds from Acme Bank, it buys $10 million in Treasury bonds from the bank. This transaction will result in several balance sheet changes for Acme Bank. The bank's reserves will increase by $10 million, its bonds will decrease by $10 million, and its loans will increase by $10 million. The impact on liabilities is that deposits will remain the same at $300 million, while equity will stay the same at $30 million. The bank's reserves will increase by the purchase amount, bonds will decrease by the purchase amount, and loans will increase by the purchase amount.