Assume That a Bank Must Keep Reserves of 20% Against

question 100

Multiple Choice

Assume that a bank must keep reserves of 20% against deposits.The bank receives a primary deposit of $50,000.What amount of excess reserves can the bank safely lend?

• A)$10,000
• B)$20,000
• C)$40,000
• D)$50,000
• E)none of the above

---

Definitions:

Held To Maturity

A classification for investment securities that a company has the positive intent and ability to hold until the specified maturity date.

Annually

Occurring once every year.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) that is global in scope.

GAAP Marketable Securities Guidance

Standards and guidelines provided by Generally Accepted Accounting Principles regarding the reporting and valuation of marketable securities.