If the Reserve Ratio Is 5 Percent,then $1,000 of Additional

question 70

Multiple Choice

If the reserve ratio is 5 percent,then $1,000 of additional reserves can create up to

• A)$5,500 of new money.
• B)$5,000 of new money.
• C)$4,000 of new money.
• D)None of the above is correct.

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Definitions:

Return on Investment

The gain or loss generated on an investment relative to the amount of money invested.

Income from Operations

Financial performance metric that calculates earnings from a company's core business operations, excluding deductions of interest and taxes.

DuPont Formula

A financial analysis formula that breaks down Return on Equity into three parts: operating efficiency, asset use efficiency, and financial leverage.

Investment Turnover

A measure of a company's efficiency in using its assets to generate sales or revenue; calculated by dividing sales by the average invested assets.