If a Bank Has Excess Reserves of $15,000 and Demand

question 171

Multiple Choice

If a bank has excess reserves of $15,000 and demand deposit liabilities of $80,000,and if the reserve requirement is 20 percent,then the bank has total reserves of

• A)$11,000.
• B)$21,000.
• C)$31,000.
• D)$41,000.

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Definitions:

Cash Flows

The total amount of money being transferred into and out of a business, particularly considered when assessing its liquidity.

Cash Budget

An estimation of the cash inflows and outflows for a business or individual for a specific period, used for managing liquidity and financial planning.

Working Capital Policy

A company's strategy concerning managing its current assets and liabilities to ensure it has sufficient liquidity to meet its short-term obligations.

Factoring Accounts Receivable

A financial transaction whereby a business sells its accounts receivable to a third party at a discount in exchange for immediate cash.