Suppose a Bank Has $200,000 in Deposits,a Required Reserve Ratio

question 22

Multiple Choice

Suppose a bank has $200,000 in deposits,a required reserve ratio of 10 percent,and bank reserves of $45,000.Then this bank can make new loans in the amount of

• A)$2,500.
• B)$10,000.
• C)$20,000.
• D)$25,000.

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Definitions:

Consolidated Income Statement

A financial statement that aggregates the income and expenses of a parent company and its subsidiaries, presenting a unified financial performance.

Interest Expense

The cost incurred by an entity for borrowed funds, typically recognized on the income statement.

Goodwill

An intangible asset that arises when one company acquires another for a price higher than the fair value of its net tangible assets, representing elements like brand, customer base, and reputation.

Acquisition-Date Fair Value

The value of an asset or liability estimated at the date of acquisition based on its current market value.