Question: The ABC bank has a deposit base on which it holds excess reserves of $42 Million at a reserve rate which relates to a money

The ABC bank has a deposit base on which it holds excess reserves of $42 Million at a reserve rate which relates to a money multiplier (MM) of 5. On January 2, 2010 Mwen-Mwen, a customer of ABC bank issued a $20 Million check drawn on its account, to Bushrod Manufacturing Company (BMC), which it deposited into its account with Satiah Bank.

Required

a) reserve ratio

b)initial deposit prior to to the $20 million transaction

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