Use the Following Example to Answer the Questions That Follow

question 64

Multiple Choice

Use the following example to answer the questions that follow.
Imagine that you deposit $25,000 in currency (which you had been storing in your closet) five into your checking account at the bank. Assume that this institution has a required reserve ratio of 25%.
-Of this deposit,what is the maximum amount the bank can hold as loans?

• A) $0
• B) $18,750
• C) $25,000
• D) $31,250
• E) $100,000

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Definitions:

Trial Balance

A financial report that lists all accounts and their balances at a specific point in time, ensuring that debits equal credits.

General Ledger Accounts

Individual accounts in the general ledger that record all transactions of a company, used to prepare financial statements.

Liquidity

The simplicity of turning an asset into cash without impacting its market value.

Long-Term Investments

Assets that a company intends to hold for more than one year, including stocks, bonds, real estate, and other financial investments.