$\text { Assets }\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }$ -In the Balance Sheet Above, the Entries Are in Millions

question 564

Multiple Choice

$\text { Assets }\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }$
$\begin{array}{|lc|lc|}\hline \text { Reserves } & \$ 400 &\text { Deposits }&\$1,200\\\text { Loans }&\$800\\\text { Total } & \$ 1,200&\text { Total }&\$1,200 \\\hline\end{array}$
-In the balance sheet above, the entries are in millions of dollars for the FBN Bank. If the desired reserve ratio equals 10 percent, FBN Bank has excess reserves of

• A) $100 million.
• B) $0.
• C) $200 million.
• D) $280 million.

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Definitions:

Base Case Level

A standard or initial set of conditions used as a reference point for financial or operational planning and analysis.

Financial Break-even

The juncture where total income matches total expenditures and costs, leading to neither a profit nor a loss.

Internal Rate Of Return

A measure of an investment's rate of return, calculated by finding the interest rate that makes the present value of cash inflows equal to the present value of cash outflows.

Required Rate

The minimum rate of return on an investment that a investor deems necessary to justify the risk of the investment.