The Megabux National Bank Currently Has Deposits of $200 Million

question 2

Multiple Choice

The Megabux National Bank currently has deposits of $200 million. If the Fed establishes a reserve requirement of 12 percent, Megabux National must hold reserves of _______ against its deposits

• A) $12 million
• B) $24 million
• C) $176 million
• D) $200 million

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Definitions:

Debt-Equity Ratio

A financial benchmark illustrating the ratio of debt to equity used in asset financing for a company.

Tax Rate

The tax obligation calculated as a percentage of income for private individuals or companies.

Net Present Value

A calculation used to determine the value of an investment by estimating future cash flows and discounting them to their present value.

Flotation Costs

Expenses incurred by a company when it issues new securities, including underwriting fees, legal fees, and registration fees.