If a Bank Has $1,000,000 in Reserves and Checking Deposits

question 41

Multiple Choice

If a bank has $1,000,000 in reserves and checking deposits of $3,000,000, what is the bank's reserve position if the required reserve ratio is 20 percent?

• A)The bank has $500,000 of required reserves and $500,000 of excess reserves.
• B)The bank has $600,000 of required reserves and $400,000 of excess reserves.
• C)The bank has $400,000 of required reserves and $600,000 of excess reserves.
• D)The bank has $200,000 of required reserves and $800,000 of excess reserves.

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Definitions:

Comparative Financial Statements

Financial reports that provide information for multiple periods, typically side by side, allowing for an easier analysis of financial performance over time.

Single-Year Statements

Financial statements or reports that cover a one-year period or fiscal year, providing a snapshot of a company's financial activity and position.

Price/Earnings

Also known as the P/E ratio, this measures a company's current share price relative to its per-share earnings.

Profit Margin

A financial metric expressing the percentage of income that remains as profit after all expenses, including taxes, are subtracted from total revenues.