Refer to the Accompanying Balance Sheet for the First National

question 147

Multiple Choice

Refer to the accompanying balance sheet for the First National Bank. Assume the reserve ratio is 15 percent. If the balance sheet was for the whole commercial banking system rather than a single bank, then loans and deposits
Could expand by a maximum of approximately

• A) $120,000.
• B) $213,333.
• C) $333,500.
• D) $415,373.

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Definitions:

Warrants

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a security at a predetermined price before a specific date.

Convertibles

Convertibles are bonds or preferred stocks that can be converted into a predetermined number of common stock or equity shares.

Coupon Rate

The percentage rate at which a bond's face value accrues interest each year.

Straight Debt

A fixed-income security, such as a bond, that has a predetermined interest rate, maturity, and principal repayment schedule.