1. As a potential jumbo CD depositor, under what circumstances would you prefer:

1. A variable -rate CD over a fixed -rate CD?
2. A zero-coupon CD over a variable-rate CD?

2. Use the following information to estimate the marginal cost of issuing a $1 million CD paying 3.25% interest. It has a one-year maturity, and the following estimates apply relative to the balance obtained:

Acquisition costs=1/8 of 1%

FDIC insurance = 1/12 of 1%

Required reserve percentage = 0%

3. A corporate customer borrows $150,000 against the firms credit line at a local bank. Indicate with a T-account how the transaction will affect the banks deposit balances held at the Fed when the firm spends the proceeds.

4. Bank X had just completed the 2-week reserve maintenance period, during which it held a daily average of $238 million in reserve deposits with the Fed. The bank had a daily average reserve deficiency the previous maintenance period of $3.75 million., which was within the allowable limit. Bank Xs daily average net transactions accounts for the base computation period along with balances for selected assets are listed below:

Daily Average (Millions of Dollars)
Net transactions accounts	$3,257
Demand deposits due from U.S. depository institutions	366
Cash items in process of collection	181
Vault cash holdings	19.3

Using the reserve percentages from Exhibit 11.3:

1. Calculate the banks daily average required reserve holdings during the maintenance period.
2. Did bank X meet its reserve target?
3. If the bank had carried forward a daily reserve surplus of $2.1 million instead of a deficiency, would it have met its target?