Given the Following Information About Metropolis Bank

question 124

Multiple Choice

Given the following information about Metropolis Bank:
Bank Deposits $50,000
Loans 17,500
Required Reserves 30,000
Excess Reserves 2,500
The required reserve ratio must be

• A) 75 percent.
• B) 60 percent.
• C) 30 percent.
• D) 15 percent.

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Definitions:

Amortized Cost

The amount at which a financial asset or liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the effective interest method.

Trading Securities

Financial instruments that are purchased and held primarily for selling them in the near term to generate income on short-term price differences.

Marketable Securities

Financial instruments that can be easily converted into cash, typically with high liquidity and short-term maturities.

Equity Method

An accounting technique used to record investments in other companies, where the investment is initially recorded at cost and adjusted thereafter for the investor's share of the investee’s profits or losses.