A bank has an average balance of transactions accounts, August 10 to 23, of $824.46 million.The average balance in the cash account is $42.014 million over this period.The bank is carrying forward a deficit of $1.276 million from the last reserve period.The rules require no reserves to be maintained for the first $8.5 million, 3 percent for amounts between $8.5 million and $45.8 million, and 10 percent thereafter. What is the reserve to be maintained with fed?
A)$38.247 million.
B)$34.419 million.
C)$36.971 million.
D)$35.087 million.
E)$35.695 million.

Question

Quizplus · Accepted Answer

The correct answer is A. The reserve to be maintained with the Fed is $38.247 million. The average balance in the transactions accounts is $824.46 million. The average balance in the cash account is $42.014 million. The bank is carrying forward a deficit of $1.276 million from the last reserve period. The rules require no reserves to be maintained for the first $8.5 million, 3 percent for amounts between $8.5 million and $45.8 million, and 10 percent thereafter. The reserve to be maintained with the Fed is calculated as follows:Reserve = (Average balance in transactions accounts - Average balance in cash account - Deficit) * Reserve requirementReserve = ($824.46 million - $42.014 million - $1.276 million) * Reserve requirementReserve = $781.17 million * Reserve requirementThe reserve requirement is calculated as follows:Reserve requirement = 0% for the first $8.5 millionReserve requirement = 3% for amounts between $8.5 million and $45.8 millionReserve requirement = 10% thereafterThe average balance in the transactions accounts is $824.46 million. The average balance in the cash account is $42.014 million. The bank is carrying forward a deficit of $1.276 million from the last reserve period. The reserve requirement is calculated as follows:Reserve requirement = 0% for the first $8.5 millionReserve requirement = 3% for amounts between $8.5 million and $45.8 millionReserve requirement = 10% for amounts between $45.8 million and $824.46 millionThe reserve to be maintained with the Fed is calculated as follows:Reserve = (Average balance in transactions accounts - Average balance in cash account - Deficit) * Reserve requirementReserve = ($824.46 million - $42.014 million - $1.276 million) * Reserve requirementReserve = $781.17 million * (0% for the first $8.5 million + 3% for amounts between $8.5 million and $45.8 million + 10% for amounts between $45.8 million and $824.46 million)Reserve = $781.17 million * (0% + $37.3 million * 3% + $778.66 million * 10%)Reserve = $781.17 million * (0% + $1.119 million + $77.866 million)Reserve = $781.17 million * $79.985 millionReserve = $38.247 million

A Bank Has an Average Balance of Transactions Accounts, August