Suppose a Bank Has $1,500,000 in Deposits and the Desired

question 114

Multiple Choice

Suppose a bank has $1,500,000 in deposits and the desired reserve ratio is 12 percent.If the bank is currently holding $200,000 in reserves,the excess reserves are equal to

• A) zero.
• B) $40,000.
• C) $120,000.
• D) $20,000.

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Definitions:

Cash Flow

The total sum of cash and cash-like assets moving in and out of a company.

NPV

Net Present Value, a method used in capital budgeting to evaluate the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows.

Cost Of Capital

The essential yield required to justify proceeding with a capital expenditure venture, such as the erection of a new plant.

Cash Flow

The net amount of cash being transferred into and out of a business, influencing its liquidity, investment, and operational strategies.