Suppose That from a New Checkable Deposit,First National Bank Holds

question 91

Multiple Choice

Suppose that from a new checkable deposit,First National Bank holds two million dollars in vault cash,eight million dollars on deposit with the Federal Reserve,and nine million dollars in excess reserves. Given this information,we can say First National Bank faces a required reserve ratio of ________ percent.

• A)ten
• B)twenty
• C)eighty
• D)ninety

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Definitions:

Market Rate

The prevailing interest rate available in the marketplace for securities or loans, influenced by supply and demand, economic conditions, and the risk profile of the investment.

Equity Kickers

Additional equity given to lenders or investors as an incentive, usually in the form of warrants or options.

Option Contract

A financial contract that allows the purchaser the option, without any compulsory enforcement, to purchase or dispose of a base asset at an agreed-upon price, either on or prior to a predetermined date.

Exercise Price

The rate at which an option contract's holder has the right to purchase (for a call option) or dispose of (for a put option) the fundamental asset.