If a Bank Has Excess Reserves of $5,000 and Demand

question 33

Multiple Choice

If a bank has excess reserves of $5,000 and demand deposit liabilities of $80,000,and if the reserve requirement is 20 percent,then the bank has actual reserves of

• A)$11,000.
• B)$20,000.
• C)$21,000.
• D)$26,000.

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Definitions:

Availability Float

The time difference between when a deposit is made in a bank account and when the amount becomes available for use.

Collection Float

The time gap between when a check is deposited into a bank account and when the funds become available.

Opportunity Cost

Opportunity cost refers to the potential benefits an individual, investor, or business misses out on when choosing one alternative over another.

Net Float

The difference between checks written against and deposited in an account and those that have been cleared and charged against the account.