Suppose a Bank Has $100 Million in Checking Account Deposits

question 219

Multiple Choice

Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 10 percent.If the Federal Reserve raises the required reserve ratio to 15 percent,then the bank will now have excess reserves of

• A)$0.
• B)-$5 million.
• C)$5 million.
• D)$15 million.

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Definitions:

Amortization

The process of gradually writing off the initial cost of an intangible asset over a period of time.

Market Rate

The prevailing price or interest rate available in the marketplace for goods, services, or securities.

Present Value Tables

Tables used to find the present value of a sum of money to be received in the future, given a specific discount rate.