The Following Balance Sheet Shows the Assets and Liabilities of the ABC

question 131

Multiple Choice

The following balance sheet shows the assets and liabilities of the ABC National Bank.Assume the desired reserve ratio is 20 percent. Refer to the above information.If the bank safely expands its loans by the maximum, the bank will now have excess reserves of:

• A)$0
• B)$3,000
• C)$12,000
• D)$5,000

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Definitions:

Synthesized

Created or formed by combining simpler substances or elements through a chemical process, leading to a new compound or product.

Cash Dividend

A distribution of a portion of a company's earnings, decided by the board of directors, paid to a class of its shareholders.

Assets

Economic resources owned or controlled by a company; they have measurable value and are expected to benefit the company by producing cash inflows or reducing cash outflows in the future.

Stock Price Appreciation

The rise in the value of a company's shares over time, reflecting the market's increased valuation of the company.