[Related to Solved Problem 13.1] Suppose that Bank of America pays a 4% annual interest rate on checking account balances while having to meet a reserve requirement of 10%. Assume that the Fed pays Bank of America an interest rate of 0.2% on its holdings of reserves and that Bank of America can earn 6% on its loans and other investments. How do reserve requirements affect the amount that Bank of America can earn on $1,000 in checking account deposits? Ignore any costs Bank of America incurs on the deposits other than the interest it pays to depositors. The 10% reserve requirement reduces the amount Bank of America can earn on $1,000 by $. (Enter your answer rounded to two decimal places.)

[Related to Solved Problem 13.1] Suppose that Bank of America pays a 4% annual interest rate on checking account balances while having to meet a reserve requirement of 10%. Assume that the Fed pays Bank of America an interest rate of 0.2% on its holdings of reserves and that Bank of America can earn 6% on its loans and other investments. How do reserve requirements affect the amount that Bank of America can earn on $1,000 in checking account deposits? Ignore any costs Bank of America incurs on the deposits other than the interest it pays to depositors. The 10% reserve requirement reduces the amount Bank of America can earn on $1,000 by $. (Enter your answer rounded to two decimal places.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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[Related to Solved Problem 13.1] Suppose that Bank of America pays a 4% annual interest rate on checking account balances while having to meet a reserve requirement of 10%. Assume that the Fed pays Bank of America an interest rate of
0.2% on its holdings of reserves and that Bank of America can earn 6% on its loans and other investments.
How do reserve requirements affect the amount that Bank of America can earn on $1,000 in checking account deposits? Ignore any costs Bank of America incurs on the deposits other than the interest it pays to depositors.
The 10% reserve requirement reduces the amount Bank
America can earn on $1,000 by $. (Enter your answer rounded to two decimal places.)

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