Calculate Average Implicit Interest Rate And Gross Interest Return Calculation

Question

The following demand deposits and cash reserves at the Fed have been documented by a bank for the computation of reserve requirements (in millions). Reserves are vault cash and reserves at the Fed.

1. What are the average daily demand deposit balances over the reserve computation period beginning the week of June 12?
    a. $286 million.
    b. $296 million.
    c. $306 million.
    d. $326 million.
    e. $352 million.


2. What is the average daily reserve required to be held by the bank for their demand deposits during the maintenance period? Suppose that the rules require no reserves for the first $5.5 million, 3 percent for amounts between $5.5 million and $42.8 million, and 10 percent thereafter.
    a. $26.44 million.
    b. $28.86 million.
    c. $29.55 million.
    d. $31.56 million.
    e. $32.06 million.
    
3. Is the bank in compliance with the requirements?
a. No, it does not meet the minimum reserve requirements.
b. Yes, it meets the minimum reserve requirements.
c. Yes, it meets the minimum requirement only after using the 2 percent carryover allowance.
d. Yes, it meets the minimum requirement only after using the 4 percent carryover allowance.
e. No, it does not meet the minimum reserve requirements even after using the 4 percent carryover allowance.


Summary

The question belongs to Finance and it is about calculation of average daily demand deposits balances, average daily reserve required and the bank’s compliance with the requirements. These are to be calculated in accordance with the demand deposits and cash reserves at Fed.

Total Word Count 60