If a Bank Had Demand Deposits of $80 Million and It

question 30

Multiple Choice

If a bank had demand deposits of $80 million and it faced a 25 percent required reserve ratio, it would be able to have a maximum amount of how many dollars worth of loans?

• A)​$20 million
• B)​$40 million
• C)​$60 million
• D)​$80 million

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Definitions:

Consumer Price Index

An index that measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Effective Annualized Rate

The interest rate on an investment or loan on an annual basis, taking compounding into account.

Inflation

The rate at which the general level of prices for goods and services is rising, eroding purchasing power.

Effective Interest Rate

The actual annual interest rate that an investor earns or pays, taking into account the effect of compounding over the period.