Consider a bank with $10 billion in deposits. Of these deposits, $8 billion are held as fixed-term deposits, and $2 billion are held in chequing accounts. (a) If the interest rate is 5% and the bank has reserve requirements of 10%, what is the cost of the reserve requirements to the bank? (b) Suppose that 15% of the bank’s chequing deposits are transferred to sweep accounts which sweep out 35% of their balance to overnight securities at the end of each day. What is the cost of the reserve requirements now?

Answer rating: 100% (QA)

I Fuom the giun informatio... View the full answer