Refer to the Information Provided in Table 10

question 134

Multiple Choice

Refer to the information provided in Table 10.4 below to answer the questions that follow.
Table 10.4
-Refer to Table 10.4. If the required reserve ratio were changed to 5% and First Charter Bank continues to hold $1,200,000 in reserves, its excess reserves will be

• A) $400,000.
• B) $600,000.
• C) $800,000.
• D) $1,000,000.

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Definitions:

Straight Bond Value

The present value of a bond's future interest payments and its principal amount at maturity, assuming it does not have any embedded options.

Intrinsic Value

The actual, inherent value of a financial asset, determined through fundamental analysis without reference to its market value.

American Call Option

An option contract that gives the holder the right, but not the obligation, to buy a specified amount of an underlying asset at a predetermined price before or on a specified date.

Exercise Price

The predetermined cost at which the owner of an option can purchase (in the case of a call option) or sell (in the case of a put option) the underlying asset or commodity.