Assume the Desired Reserve Ratio Is 25 Percent and the Winnipeg

question 71

Multiple Choice

Assume the desired reserve ratio is 25 percent and the Winnipeg Bank borrows $10,000 from the Bank of Canada.As a result:

• A)chartered bank reserves are increased by $10,000.
• B)the supply of money automatically declines by $7,500.
• C)chartered bank reserves are increased by $7,500.
• D)the supply of money is automatically increased by $10,000.

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Definitions:

Cost of Equity

Cost of equity is the return a company requires to decide if an investment meets capital return requirements and can be seen as the return on equity that shareholders expect for their investment risk.

Flotation Cost

The total costs incurred by a company in issuing new securities, including underwriting, legal, registration, and other expenses.

Cost of Capital

The rate of return a company must pay to its shareholders and debt holders, representing the cost of obtaining funds to finance its operations.

Long-Term Funds

Investments or sources of financing that are provided or required for a duration exceeding one year.