Teague Corporation Permits Any of Its Employees to Buy Shares

question 18

Multiple Choice

Teague Corporation permits any of its employees to buy shares directly from the company through payroll deduction. There are no brokerage fees and shares can be purchased at a 10% discount. During July, employees purchased 40,000 shares at a time when the established market price was $26 per share. Teague will record an increase in cash of ________ associated with July purchases.

• A) $0
• B) $104,000
• C) $936,000
• D) $1,040,000

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Definitions:

Excess Reserves

Excess Reserves are the reserves that banks hold over and above the legal or required minimum they need to keep against deposits.

Open Market Purchase

A monetary policy operation where a central bank buys government securities from the market in order to inject liquidity and encourage lending and investment.

Required Reserve Ratios

Regulatory requirements determining the minimum fraction of customer deposits that commercial banks must hold as reserves, rather than loan out.

Discount Rate

Discount Rate is the interest rate charged by central banks on loans they offer to commercial banks or the rate used to discount future cash flows to their present value.