Final answer:
When the Fed conducts an open market purchase and buys Treasury bonds from Acme Bank, Acme Bank will convert the bond sale proceeds to new loans by increasing their loans by $10 million. The assets of Acme Bank will now include reserves $30 million, bonds $50 million, and loans $60 million. The liabilities will remain the same at deposits $300 million and equity $30 million.
Step-by-step explanation:
When the Fed conducts an open market purchase by buying $10 million in Treasury bonds from Acme Bank, there will be changes in the balance sheet of Acme Bank. The initial balance sheet of Acme Bank consists of Assets (reserves $30 million, bonds $50 million, and loans $50 million) and Liabilities (deposits $300 million and equity $30 million).
After the sale of the bonds, Acme Bank will receive $10 million. To convert the bond sale proceeds to new loans, Acme Bank will increase its loans by $10 million. As a result, the new balance sheet will show an increase in loans to $60 million. The assets will now be: reserves $30 million, bonds $50 million, and loans $60 million. The liabilities will remain the same: deposits $300 million and equity $30 million.
The change in the revenues and expenses is not specified in the question, so there will be no margin explanations for them.