If a Bank Increases the Amount of Cash It Has

question 98

Multiple Choice

If a bank increases the amount of cash it has in its vault,how would this affect the bank's balance sheet?

• A) Reserves would increase, liabilities would stay the same, and owner's equity would increase.
• B) Reserves would decrease, liabilities would stay the same, and owner's equity would increase.
• C) Reserves would increase, liabilities would decrease, and owner's equity would decrease.
• D) Reserves would increase, liabilities would stay the same, and owner's equity would decrease.
• E) Reserves would decrease, liabilities would increase, and owner's equity would decrease.

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Definitions:

Present Value

The current worth of a future sum of money or stream of cash flows, discounted at a specified rate of return.

Actuarial Information

Data and analyses related to assessing financial risks and uncertainties, typically in the context of insurance and finance, relying on mathematical and statistical methods.

Interest Capitalization

The addition of accrued interest to the principal balance of a loan, increasing the total amount owed.

Interest Capitalization

The process of adding accrued interest to the principal balance of a loan, thereby increasing the total amount of interest to be paid over the life of the loan.