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If a Bank Receives an Additional Deposit of $50,000 and the Desired

question 434

Essay

If a bank receives an additional deposit of $50,000 and the desired reserve ratio is 20 percent, what is the amount of new loans the bank can make?


Definitions:

Interest

The cost of borrowing money or the return on investment for the lender, expressed as a percentage of the principal.

Note Receivable

A written promise for amounts to be received by one party from another, typically including the terms for repayment.

Maturity Date

The specified date on a financial instrument when the principal is due to be paid back in full to the lender.

Cash Received

Funds that are taken in by a business, representing inflow from sales, investments, financing, and other sources.

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