Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 25, Problem 2.5P

Sub part (a):

To determine

How much the bank needs to keep as reserves.

Sub part (b):

To determine

The excess reserves kept by the bank.

Sub part (c):

To determine

By how much can the bank increase its loan.

Sub part (d):

To determine

The new T-account for the bank.

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1. A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate fund, and the third is a (riskless) T-bill money market fund that yields a rate of 8%. The probability distributions of the risky funds have the following characteristics: Standard Deviation (%) Expected return (%) Stock fund (Rs) 20 30 Bond fund (RB) 12 15 The correlation between the fund returns is .10.
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