Suppose a Chartered Bank's Reserves Increase by $3,000 and the Bank

question 5

Multiple Choice

Suppose a chartered bank's reserves increase by $3,000 and the bank, which holds no excess reserves, makes a loan of $2,400.What is the desired reserve ratio?  

• A) 0.10 
• B) 0.20 
• C) 0.25 
• D) 0.75

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Definitions:

Market Index

A statistical measure that tracks the performance of a group of stocks, representing a portion of the overall market.

Correlation Coefficient

An analytical tool that determines the magnitude of association between the fluctuations of two interrelated variables.

Standard Deviation

A measure of the amount of variation or dispersion in a set of values, often used to quantify the volatility of a financial instrument or investment portfolio.

Stock-index Mutual Fund

A mutual fund that mimics the composition and performance of a particular stock market index, allowing investors to invest in the performance of the whole market or specific sectors.