If the Reserve-Deposit Ratio Falls,then

question 105

Multiple Choice

If the reserve-deposit ratio falls,then

• A) the ability of commercial banks to create money is greater.
• B) the ability of commercial banks to create money is lower.
• C) the money multiplier is smaller.
• D) the level of required reserves is greater.
• E) the ability of commercial banks to create money is unaffected.

Recognize the factors affecting a firm's overall cost of equity.

Understand that the cost of equity is an estimate and not directly observable in the financial markets.

Know the variables affecting the security market line (SML) approach to estimating expected return on a risky asset.

Differentiate between the after-tax cost of debt and the yield to maturity concerning bond prices and interest rates.

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Definitions:

Ending Inventory

The total value of goods available for sale at the end of an accounting period, calculated as the sum of beginning inventory plus purchases minus cost of goods sold.

Minimum Cash Balance

The lowest amount of cash a company aims to maintain on hand to meet immediate needs and navigate through unforeseen expenditures.

Expected Cash Disbursements

Amounts of cash a company anticipates paying out over a specified period, often related to its operating expenses and investments.

Budgeted Accounts Receivable

The projected amounts to be received by a company for goods or services offered on credit, as estimated during the budgeting process.