Economics of Money, Banking and Financial Markets, The, Business School Edition (5th Edition) (What's New in Economics)
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Chapter 9, Problem 22AP
To determine

The cost of the insurance policy.

Concept Introduction:

Reserves are generally the deposits of the customers which are held by the bank as a reserve for various purposes such as deposits with the central bank or for maintaining the necessary cash reserves. It generally includes the cash which a bank holds to avoid unnecessary risks.

The cost of insurance is the maximum expenditure that a bank will be ready to incur and it will only be up to the amount of interest it earns.

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