The Reserve Requirement Is

question 61

Multiple Choice

The reserve requirement is:

• A) the regulation that sets the minimum fraction of deposits banks must hold in reserve.
• B) the dollar amount of cash banks must keep on hand and not loan out.
• C) currently set at $2 million for most banks.
• D) a loose guideline for how much banks must hold in reserves.

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Definitions:

Amortized Loan

A loan with scheduled periodic payments that consist of both principal and interest, designed to pay off the debt by the end of the term.

Effective Rate

The actual interest rate earned or paid on an investment, loan, or other financial product, accounting for the effect of compounding.

Amortization Schedule

A table detailing each periodic payment on an amortizing loan, including the portion of the payment that goes toward principal and interest over the loan term.

Effective Rate

The actual interest rate on an investment or loan, taking into account the compounding of interest, as opposed to the nominal rate.