When a Customer Demands Additional Currency and Cashes a Check

question 71

Multiple Choice

When a customer demands additional currency and cashes a check for $500, all of the following occur except

• A) the deposits of the bank are reduced $500.
• B) required reserves are reduced.
• C) Federal Reserves' notes decrease.
• D) additional reserves must be acquired if the bank has no excess reserves.

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Definitions:

Relative Mispricing

The situation where the price of an asset does not reflect its underlying value when compared to another asset, creating an opportunity for arbitrage.

Market Neutral

A hedged portfolio with no net exposure to market movements.

Nondirectional

Trading strategies not dependent on the market's direction, aiming to profit regardless of whether prices are rising or falling.

Directional

In investing, this term refers to strategies or trades based on the anticipated direction of the market or an asset's price movement.