Transcribed image text: 8. City Bank has estimated that its average daily demand deposit balance over the recent 14- day reserve computation period was $225 million. The average daily balance with the Fed over the 14-day maintenance period was $11 million, and the average daily balance of vault cash over the two-week computation period was $7.5 million. What formula is used? How are those numbers obtained? 10.3, 44.4, 225 a. Under the rules effective in 2009, what is the amount of average daily reserves required to be held during the reserve maintenance period for these demand deposit balances? Reserve requirements = (0 x $10.3m) + ($44.4m - $10.3m)(0.03) + ($225m - $44.4m) (0.10) = 0) + $1.023m + $18.06m = $19.083 million After subtracting the average daily balance of vault cash of $7.5 million, the bank needs to maintain a daily average of $11.583 million ($19.083 million - $7.5 million) during the maintenance period. b. What is the average daily balance of reserves held by the bank over the maintenance period? By what amount were the average reserves held higher or lower than the required reserves? The average daily balance over the maintenance period was $11 million. Therefore, average reserves held were short $0.583 million. c. If the bank had transferred $20 million of its deposits every Friday over the two-week computation period to one of its offshore facilities, what would be the revised average daily reserve requirement? More, where does 225m come from? For the 14-day period, the sum of its daily average is = $225m x 14 = $3,150m. If $20 million is transferred on Friday, the total reduction is $120 million over two weekends ($20m x 3 days x 2 weekends), and the total 14-day balance is $3,030m. The average daily deposits will be $216.4286 million (=3030/14). Reserve requirements = (0 x $10.3m) + ($44.4m - $10.3m)(0.03) + ($216.4286m - $44.4m) (0.10) = 0 + $1.023m + $17.2029m = $18.2259 million. City Bank needs to maintain average reserves of $10.7259 million ($18.2259 million - $7.5 million) during the maintenance period. Since it had $11 million of reserves, extra reserves of $0.2741m per day can be carried forward to the next reserve maintenance period