When a bank keeps dealer reserves, the reserves are primarily used:
A) to cover charge-offs.
B) to increase bank profits.
C) to increase dealer profits.
D) to reduce taxes.
E) to increase advertising revenues.

Question

Quizplus · Accepted Answer

Dealer reserves are funds kept by a bank that are specifically reserved for charge-offs, which are losses due to unpaid loans or leases. Therefore, the primary use of dealer reserves is to cover charge-offs.

When a Bank Keeps Dealer Reserves, the Reserves Are Primarily