1. You live in a world with a universal 8.5% required reserve rate for all depository institutions. Assume the police take the $300,000 found in Whitey Bolgers walls and deposits the cash back in the banking system (an example of forced dishoarding).

A) What will the change in the banks T-account look like immediately after the deposit?

B) Assuming the bank wants no excess reserves, what would its T-account look like after it loans out the excess reserves from the first $300,000 deposit?

C) What would be the ending T-account if no bank held excess reserves (following the $300,000 deposit)? (Note: follow the same process used in class.)

2. A money market instrument has a current price of $998, a future value of $1,000, and has 45 days until it matures. What rate of interest would be quoted for it under each of the following quotation methods? A) Holding Period Return B. Bank Discount Yield C) Money Market 360-day Yield D) Money Market 365-day Yield E) APY