Consider a New Deposit of $10 000 to the Canadian

question 123

Multiple Choice

Consider a new deposit of $10 000 to the Canadian banking system.The commercial bank that initially receives this deposit will find itself with

• A)no excess reserves if there is no reserve requirement.
• B)$1000 of excess cash reserves if its target reserve ratio is 10%.
• C)$2000 of excess cash reserves if its target reserve ratio is 2%.
• D)$9000 of excess cash reserves if its target reserve ratio is 10%.
• E)$98 000 of excess cash reserves if its target reserve ratio is 2%.

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Definitions:

Minimum Required Rate Of Return

The lowest acceptable return on an investment, determined by the investor’s preferences, risks, and opportunity costs.

Net Operating Income

A company's total earnings from its operations, exclusive of taxation and interest.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, representing the ownership interest of the shareholders.

Sales

The total amount of goods or services sold by a company within a specific period, generating revenue.