Calculate the annualized rate of return on a 200-day commercial paper. This loan does not pay periodic interest; it is a discount security. The face value of the paper is $1 million, and its current market value is $980,000.

Part 2. What is the amount of money created in the banking system due to an initial deposit of $1,000 if the required reserve is 5%? The banks are not holding any excess reserves.

Part 3. Section a. Discuss the Federal Reserves ability to control the amount of money created in the banking system by changing the reserve requirements. Section b. What will happen to the Reserves ability to control money creation if banks increase or start holding excess reserves?

Part 4. As a shareholder in bank, which is more important to you, ROE or ROA? Why