Question
Question No. 2: (15marks) Problem 1- (5marks) Calculate the Expected Return on the General Motor Bond if the Return is 11% three-fourth of the time
Question No. 2: (15marks)
Problem 1- (5marks)
Calculate the Expected Return on the General Motor Bond if the Return is 11% three-fourth of the time and 7% one fourth of the Time.
Problem 2- (10 marks)
Suppose $150 of currency is in circulation. What is the banks impact on money supply? Calculate the money supply in case of Fractional reserve banking system. Pretend the Reserve Ratio is by 2.5%.
- Borrowers first withdrew the loan from 1st National Bank and deposited it in 2nd National Bank.
- Borrowers Took The Loan from 2nd National Bank and Deposited it in 3rd National Bank
- Then Borrowers withdrew finally the loan from 3rd National Bank and deposited it in 4th National Bank.
Questions:
- Open a T Account for each Bank with the previous situations.
- Show the Impact on money supply (How much the $150 of reserves had generated?)
2nd National Bank | 1st National Bank |
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4th National Bank | 3rd National Bank |
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