If the Desired Reserve Ratio Is 3 Percent and Deposits

question 333

Multiple Choice

If the desired reserve ratio is 3 percent and deposits totaled $575 billion, banks would hold

• A) $534.75 in reserves.
• B) $17.25 billion in unplanned reserves.
• C) $1,725 billion in currency.
• D) $17.25 billion in reserves.

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Definitions:

Minimum Required Return

The lowest acceptable return on an investment, considering the risk and the cost of capital.

Expected Return

The anticipated return on an investment, taking into account the probabilities of each potential outcome.

Equity

The owners' stake in a company, represented by the amount of capital contributed plus any profits or minus any losses.

Debt

Debt represents money borrowed that must be repaid, typically with interest, by the borrower to the lender.