If a Bank Had Demand Deposits of $50 Million and It

question 251

Multiple Choice

If a bank had demand deposits of $50 million and it faced a 25 percent required reserve ratio, it would be required to have how many reserves?

• A)​$50 million
• B)​$37.5 million
• C)​$25 million
• D)​$12.5 million

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Definitions:

Simple Rate Of Return

A method to calculate the profitability of an investment by dividing the annual incremental net operating income by the initial investment cost.

Straight-Line Depreciation

A method of calculating the depreciation of an asset by evenly spreading its cost over its useful life.

Salvage Value

The estimated resale value of an asset at the end of its useful life, taken into consideration for depreciation calculations.

Net Present Value

A financial metric that calculates the value of a projected income stream in today's dollars, net of the initial investment.