If a Bank Has Excess Reserves of $4,000 and Demand

question 198

Multiple Choice

If a bank has excess reserves of $4,000 and demand deposit liabilities of $100,000,and if the reserve requirement is 15 percent,then the bank has actual reserves of

• A)$17,000.
• B)$19,000.
• C)$24,000.
• D)$29,000.

---

Definitions:

Maturity Risk Premium (MRP)

The Maturity Risk Premium is the additional return investors demand for holding longer-term securities due to increased risk of price fluctuations and uncertainty over a long period.

Treasury Bonds

These are long-term, fixed-interest government debt securities with a maturity of more than ten years. They are considered safe investments because they are backed by the U.S. government.

Capital Gain/Loss

The increase or decrease in the value of an investment or real estate, calculated by the difference between the purchase price and the sale price.

Par Value

The face value of a bond or stock as stated by the issuer, which is the amount paid to the holder at maturity for bonds, or the nominal value of a share.