Excess reserves act as insurance against deposit outflows. Suppose that on a yearly basis Malcom Bank holds
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Excess reserves act as insurance against deposit outflows. Suppose that on a yearly basis Malcom Bank holds $12 million in excess reserves and $88 million in required reserves. Suppose that Malcom Bank can earn 3.5% on its loans and that the interest paid on (total) reserves is 0.2%. What would be the cost of this insurance policy?
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Related Book For
Economics of Money Banking and Financial Markets
ISBN: 978-0134733821
12th edition
Authors: Frederic S. Mishkin
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