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4. Suppose that the amount of reserves of a commercial bank at the end of the business day is a normally distributed random variable with
4. Suppose that the amount of reserves of a commercial bank at the end of the business day is a normally distributed random variable with mean $10 million and standard deviation $2 million. Suppose, also, that the reserve requirement for this bank is $7 million. a. What is the probability that this bank falls below its reserve requirement? b. Suppose the Federal Reserve fines this bank $10000 each time it falls below its reserve requirements. What is the mean or expected value of the ne this bank must pay the Fed? c. If this bank wants its mean ne to be $200, how low would the probability of falling below the reserve requirement need to be? (1. What value must the standard deviation of its reserve holdings need to be in order to achieve the probability that would lead to a $200 average fine
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