Table 9-5 Bolton Bank: Partial Balance Sheet

question 177

Multiple Choice

Table 9-5
Bolton Bank: Partial Balance Sheet
(All figures in $ million)

-Refer to Table 9-5. The required reserve ratio is 10%. What is the maximum amount of new loans that Bolton bank can create and by how much can Bolton initially increase the money supply, assuming that newly created deposits are transferred to another bank?

• A) $30 million; $30 million
• B) $70 million; $30 million
• C) $70 million; $70 million
• D) $70 million; $700 million

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Definitions:

Interest Revenue

Income earned from lending money or depositing funds in interest-bearing accounts.

Present Value Factors

Numerical factors used to calculate the present value of a future amount by considering the time value of money and interest rates.

Operating Lease

A contract that allows for the use of an asset but does not convey rights similar to ownership, typically shorter term and cancellable.

Future Rentals

Expected or scheduled payments for the use of tangible assets (such as real estate or equipment) over the duration of a lease agreement.