Describe How Actual Reserves Are Calculated

question 177

Essay

Describe how actual reserves are calculated.Explain the difference between required reserves and excess reserves.How do reserves affect the amount of loans a bank can make?

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Definitions:

Asset Values

The monetary worth placed on assets, considering factors such as market value, cost, and depreciation.

Capitalized

The process of recording a cost or expense on the balance sheet for the purposes of delaying full recognition of the expense over time through depreciation or amortization.

Interest Capitalization

The process of adding unpaid interest to the principal balance of a loan, thereby increasing the total amount owed.

Capital Expenditures

Capital allocated by a corporation to purchase, improve, and manage tangible assets like land, factories, or machinery.