Suppose That a Bank Has $100 Million in Checkable Deposits

question 134

Multiple Choice

Suppose that a bank has $100 million in checkable deposits and the required reserve ratio is 0.1.If the bank has $5 million in excess reserves,then it would be able to lend out

• A)$0
• B)$5 million
• C)$10 million
• D)$15 million
• E)$20 million

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Definitions:

Required Rate of Return

The minimum return an investor expects to receive on an investment to compensate for its risk.

Net Present Value

A method used in capital budgeting to evaluate the profitability of an investment by calculating the difference between the present value of cash inflows and outflows.

Working Capital

The distinction between a corporation's short-term assets and liabilities, showing the available capital for operational purposes.

Fast-Food Chain

A series of restaurants serving food quickly and standardized in method and by the same brand name.