The following table shows the balance sheet for all banks combined in the banking system.All banks have a target reserve ratio of 12.5 percent.
a)What is the amount of excess reserves.
b)What is the maximum amount that loans and deposits can be increased?
c)If the banking system were fully loaned up,by how much will the money supply have increased?
Definitions:
Yield To Maturity
The total return expected on a bond if held until its maturity date, considering all interest payments and the principal repayment.
3-Year Bond
A debt security issued by an entity that matures in three years from the date of issuance, indicating the length of time before the principal is repaid.
Forward Rate
The agreed-upon rate for a financial transaction that will occur at a future date, often used in foreign exchange and interest rate markets.
Coupon Rate
The annual interest rate paid on a bond, expressed as a percentage of the bond's face value.
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