The Following Table Lists Some Statistics on Boring Bank

question 127

Multiple Choice

The following table lists some statistics on Boring Bank.

-Refer to the table above.If the required reserve ratio changes to 20 percent,and Boring Bank makes only the necessary changes to comply with regulations,how will the bank's total assets and total liabilities change?

• A) Total assets will decrease by $20, and total liabilities will remain the same.
• B) Total assets will increase by $20, and total liabilities will decrease by $20.
• C) Both total assets and total liabilities will decrease by $20.
• D) Both total assets and total liabilities will remain the same.

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Definitions:

Coupon Rate

The coupon rate is the annual interest rate paid by bond issuers on the bond's face value.

Clean Price

The price of a bond net of accrued interest; this is the price that is typically quoted.

Coupon Bond

A type of bond that pays the holder periodic interest payments based on a predetermined rate (the "coupon rate") until it matures, at which point the principal (or face value) is repaid.

Yield To Maturity

The total expected return on a bond if held to its maturity date, including both interest payments and any gain or loss if the bond was purchased at a discount or premium.