If a Bank Has Zero Excess Reserves and One of Its

question 149

Multiple Choice

If a bank has zero excess reserves and one of its creditworthy customers applies for a loan,the bank may be able to grant the loan if it can

• A) apply some of its loan repayments to obtain the funds for the new loan.
• B) obtain extra funds in the federal funds market.
• C) obtain extra funds by borrowing from the Fed.
• D) any of the above
• E) b or c

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Definitions:

Raw Materials Cost

The cost associated with the acquisition of raw materials that are then transformed into finished goods.

Expected Cash Collections

An estimate of the amount of money a company anticipates receiving from its customers over a certain period, based on sales forecasts and credit policies.

Ending Finished Goods Inventory

The value of goods that have been completed but not yet sold at the end of an accounting period.

Ending Raw Materials Inventory

The value of raw materials that remain unsold and available for use at the end of an accounting period.