-The Table Above Represents a Bank's T-Account

question 102

Multiple Choice

-The table above represents a bank's T-account.Suppose it is the only bank in town and individuals in town hold no cash.Assuming the reserve ratio is 10%,what will be the bank's deposits and reserves at the end of the money creation process?

• A) Deposits will equal $200,000 and reserves will equal $20,000.
• B) Both deposits and reserves will equal $200,000.
• C) Deposits will equal $2,000,000 and reserves will equal $200,000.
• D) Both deposits and reserves will equal $2,000,000.
• E) Both deposits and reserves will equal $2,200,000.

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Definitions:

Arithmetic Return

The simple average of periodic returns of an investment over a specified time frame.

Dollar-Weighted Return

A method of calculating an investment's return that accounts for the timing and magnitude of cash flows into and out of the investment.

Dollar-Weighted Return

A method of calculating an investment's return that considers the timing and amount of capital inflows and outflows.

Dividend

A portion of a company's earnings distributed to its shareholders, usually in the form of cash or additional stock.