If a local bank decides to convert some of its U.S.Treasury securities into cash,which it will hold in its vault,reserves will ________,liabilities will ________,and owner's equity will ________.
A) increase; stay the same; decrease
B) increase; stay the same; stay the same
C) decrease; decrease; decrease
D) decrease; stay the same; decrease
E) stay the same; increase; decrease

Question

Quizplus · Accepted Answer

When a bank converts its U.S. Treasury securities into cash, its reserves increase because cash is a part of reserves. Liabilities remain unchanged because the bank's obligations do not change. Owner's equity also stays the same because the transaction does not affect the bank's net worth.

If a Local Bank Decides to Convert Some of Its