If the Reserve Ratio Is Designated by "R," How Much

question 158

Multiple Choice

If the reserve ratio is designated by "r," how much of a deposit can banks lend out?

• A) 1 / r
• B) (1 - r)
• C) 1 / (1 - r)
• D) r / (1 - r)

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Definitions:

Discount Rate

The rate utilized in DCF analysis for estimating the present value of future cash flows.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available for running day-to-day operations.

Salvage Value

The anticipated end value of an asset after exhausting its useful life.

Discount Rate

The interest rate used to calculate the present value of future cash flows.