-The Above Table Gives the Initial Balance Sheet for Mini

question 514

Multiple Choice

-The above table gives the initial balance sheet for Mini Bank. If the bank's desired reserve ratio is 10 percent, it will make

• A) more loans.
• B) fewer loans.
• C) no change in its lending.
• D) You cannot predict what the bank will do from this balance sheet without more information.

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Definitions:

Cash Flow

The combined value of financial transactions into and out of an enterprise, crucially affecting its cash reserves.

Present Value

is the current worth of a future sum of money or stream of cash flows given a specified rate of return.

Discount Rate

The rate of interest utilized to calculate the current value of future cash flows in a discounted cash flow assessment.

Incremental Net Income

The additional net income that results from a specific business decision compared to an alternative.