Using the formula for an infinite sum, if "r" designates the reserve ratio, the 1 / reserve ratio would equal
A) (1 - r).
B) 1 / (1 - r).
C) 1 / [1 - (1 - r)].
D) r / (1 - r).

Question

Quizplus · Accepted Answer

The formula for the infinite sum of a geometric series is 1 / (1 - r), where "r" is the common ratio. In this context, the reserve ratio "r" is subtracted from 1 to find the common ratio of the series, so the correct expression is 1 / [1 - (1 - r)].

Using the Formula for an Infinite Sum, If "R" Designates