If the Required Reserve Ratio Is 5%,what Is the Value

question 37

Multiple Choice

If the required reserve ratio is 5%,what is the value of the simple deposit multiplier?

• A) 0.05
• B) 0.20
• C) 5
• D) 20

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Definitions:

Pure Discount Loan

A loan where the borrower receives a sum of money upfront and repays a higher amount at the end of the loan period, effectively paying interest by the difference.

Lump Sum Payment

An isolated financial disbursement occurring once, instead of being divided into multiple payments over a duration.

Annual Interest Payments

Periodic payments made to bondholders, typically annually, that represent the interest earned on the investment.

Effective Annual Rate

The real return on an investment, taking into account the effect of compounding interest over a year.