If the Total Amount of Demand Deposits in the Country

question 130

Multiple Choice

If the total amount of demand deposits in the country increases by $12,000 after the Fed purchases $6,000 in bonds,what is the required reserve ratio?

• A) 0.4
• B) 0.1
• C) 0.2
• D) 0.5
• E) 0.3

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Definitions:

Cost of Capital

The necessary return rate on investments a firm must attain to keep its market price stable and appeal to investors.

Net Present Value

A method used in capital budgeting to assess the profitability of an investment or project by calculating the difference between the present value of cash inflows and the present value of cash outflows.

Discount Rate

The interest rate used to discount future cash flows to their present value, often used in the context of evaluating investment opportunities.

WACC

Weighted Average Cost of Capital, a calculation of a firm's cost of capital wherein each category of capital is proportionately weighted.