Chapter 12: Problem 452
What is meant by a bank loan that is called a 7 percent discount?
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Key Concepts
These are the key concepts you need to understand to accurately answer the question.
Chapter 12: Problem 452
What is meant by a bank loan that is called a 7 percent discount?
These are the key concepts you need to understand to accurately answer the question.
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Get started for freeSuppose that in the banking system as a whole demand deposits are equal to \(\$ 80,000,000\) and reserves are equal to \(\$ 17,000,000\) with a legal reserve ratio of \(10 \%\). If the Federal Reserve doubles the required ratio, by how much will the money-creating potential of the banking system as a whole drop?
What is the rate of interest you pay when you agree with your bank to 1) borrow a loan of \(\$ 5,000\) at \(10 \%\) interest, and 2) conclude a life-insurance with a premium of \(\$ 30\) ? This enables you to buy a new car; the loan has to be repaid in monthly installments over 24 months.
Suppose you decide to open a bank and issue \(\$ 100,000\) of capital stock to set it up. \(\$ 80,000\) of this is used to buy the building. The other \(\$ 20,000\) is kept as cash. What will the original balance sheet be and how will it change with each of the following transactions: a. Customers deposit \(\$ 30,000\) in demand deposit accounts in your bank; b. The bank decides to buy \(\$ 20,000\) of government bonds.
Mr. Jones is president of the First National Bank of St. Louis and wishes to determine if his bank is holding too much of its demand deposits as reserves. The bank's total deposits = \(\$ 1,700,000\) and the reserve ratio is \(20 \%\). If Mr. Jones finds that reserves \(=\$ 850,000\) what might he conclude about excess reserves?
Suppose a bank has \(\$ 250,000\) in deposits, and \(\$ 10,000\) in excess reserves. If the required reserve ratio is \(20 \%\), what are the bank's actual reserves?
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