If First Guarantee Bank Confronts a 10 Percent Reserve Requirement

question 122

Multiple Choice

If First Guarantee Bank confronts a 10 percent reserve requirement and has excess reserves of $2,000,000,what is the maximum amount of additional loans that the bank can extend?

• A)$200,000
• B)$1,800,000
• C)$2,000,000
• D)$20,000,000

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Definitions:

Required Rate Of Return

The minimum return an investor expects to achieve by investing in a specific asset, considering the risk associated with the investment.

Dividends Per Share

The amount of dividends paid out to shareholders per share of a company's stock.

Growth In Dividends

The pace at which dividend distributions to shareholders by a company grow over a period.

Required Rate Of Return

This is the minimum return that investors expect or demand for an investment to be considered worthwhile.