Suppose That from a New Checkable Deposit,First National Bank Holds

question 185

Multiple Choice

Suppose that from a new checkable deposit,First National Bank holds eight million dollars on deposit with the Federal Reserve,one million dollars in required reserves,and faces a required reserve ratio of ten percent. Given this information,we can say First National Bank has ________ million dollars in vault cash.

• A)two
• B)eight
• C)nine
• D)ten

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Definitions:

Equity Method

An accounting technique used to record investments in other companies, where the investment is significant but does not result in full control or majority ownership, typically 20% to 50% of the investee's voting stock.

Cost Method

An accounting method used to value an investment at its original purchase cost, adjusted for dividends, stock splits, and stock dividends.

Intercompany Interest Revenues

Income earned by one entity within a corporate group for lending funds to another entity within the same group, typically eliminated during the consolidation process for financial reporting.

Interest Expense

The cost incurred by an entity for borrowed funds, including loans, bonds, or lines of credit.