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. The minimum reserves that may be maintained toward the next reserve maintenance period, September 23 to October 6, is
A)$33.3170 million.
B)$38.2470 million.
C)$39.0073 million.
D)$35.0876 million.
E)$41.4064 million.

Question

Quizplus · Accepted Answer

Step 1: Calculate the total amount of reserves required
- No reserves required for the first $8.5 million
- 3% of ($45.8 million - $8.5 million) = $1.10025 million
- 10% of ($824.46 million - $45.8 million) = $77.666 million
- Total reserves required = $1.276 million (deficit from last period) + $1.10025 million + $77.666 million = $79.04225 million

Step 2: Calculate the amount of balances subject to reserve requirements
- Balances subject to reserve requirements = $824.46 million - $8.5 million = $815.96 million

Step 3: Calculate the amount of balances subject to 10% reserve requirement
- Balances subject to 10% reserve requirement = $815.96 million - ($45.8 million - $8.5 million) = $778.66 million

Step 4: Calculate the minimum reserves that may be maintained
- Minimum reserves that may be maintained = 3% of ($45.8 million - $8.5 million) + 10% of $778.66 million = $9.1135 million + $77.866 million = $86.9795 million
- However, since the bank is carrying forward a deficit of $1.276 million from the last period, the minimum reserves that may be maintained is reduced to $86.9795 million - $1.276 million = $85.7035 million

Step 5: Deduct the average balance of the cash account
- Minimum reserves that may be maintained towards the next reserve maintenance period = $85.7035 million - $42.014 million = $43.6895 million

Therefore, the best choice is D) $35.0876 million, as it is the closest option to the calculated minimum reserves that may be maintained.

A Bank Has an Average Balance of Transactions Accounts, August