Final answer:
An impound account balance would appear as a debit on a buyer's statement when a loan is assumed. Factors such as late payments, changes in the economy's interest rates, and a borrower's financial health affect the value of loans in the secondary market. A Fed's open market purchase affects a bank's balance sheet by increasing reserves for new loans while reducing bonds.
Step-by-step explanation:
Understanding Buyer's Statement and Bank Balance Sheets
When examining a buyer's statement in the context of assuming a loan, an impound account balance would normally appear as a debit. This balance represents funds held by the lender for future payments related to the property, such as property taxes and insurance. In terms of bank balance sheets, money listed as assets may not actually be in the bank as these represent loans made to customers, which are considered assets because they are expected to be repaid with interest.
When purchasing loans on the secondary market, the value given to a loan can fluctuate based on several factors. If the borrower has been late on payments, this would typically lead to paying less for the loan due to increased risk. Conversely, if interest rates rise, a fixed-rate loan made at a lower rate would be less desirable, decreasing its market value. Conversely, if the borrower's financial situation improves, as indicated by declared profits, the loan becomes less risky and more valuable. Lastly, if interest rates fall, a loan with a higher interest rate made before the decrease becomes more valuable due to the higher interest earnings compared to new loans.
In scenarios like the Federal Reserve conducting an open market purchase, the changes in Acme Bank's balance sheet would involve an increase in reserves and a corresponding decrease in bonds held. Since bonds are sold and converted into reserves, the bank can then use these funds to issue new loans, thus increasing the loans listed under assets while maintaining the liabilities unchanged.