To Minimize the Cost of Holding Reserves for Small Banks

question 132

Multiple Choice

To minimize the cost of holding reserves for small banks, the:

• A)Required reserve rate decreases as the amount of deposits increases
• B)Required reserve rate is constant
• C)Required reserve rate is not applied for transaction deposits less than $100 million
• D)First few million of transactions deposits are exempt from reserve requirements

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Definitions:

Negotiated

The process by which parties come to a mutual agreement through discussion and compromise.

Pre-emptive Rights

The right of existing shareholders in a company to have the first opportunity to purchase new shares issued by the company, to maintain their proportionate ownership.

Logging Operation

The process of cutting down trees, removing them from the forest, and transporting the logs to be processed into lumber or other wood products.

Shareholders Agreement

A contract among the shareholders of a company detailing their rights, obligations, and the management of the company.