A Bank That Borrows from the Fed at 3 Percent

question 45

Multiple Choice

A bank that borrows from the Fed at 3 percent annual interest

• A)must hold 3 percent of its total reserves as required reserves
• B)must hold 97 percent of its total reserves as required reserves
• C)will be able to profit by charging less than 3 percent for its loans
• D)hopes to charge more than 3 percent for its loans
• E)must give up U.S.government securities to secure the loan