Introduction to Finance

1. 
A new bank has vault cash of $1 million and $5 million in deposits 
held at its Federal Reserve District Bank. 
a. 
If the required reserves ratio is 8 percent, what dollar amount of 
deposits can the bank have?
b. 
If the bank holds $65 million in deposits and currently holds 
bank reserves such that excess reserves are zero, what required re-
serves ratio is implied?
2. 
Assume a bank has $5 million in deposits and $1 million in vault 
cash. If the bank holds $1 million in excess reserves and the required 
reserves ratio is 8 percent, what level of deposits are being held?
3. 
A bank has $110 million in deposits and holds $10 million in vault 
cash.
a. 
If the required reserves ratio is 10 percent, what dollar amount of 
reserves must be held at the Federal Reserve Bank?
 7. 
(LO 4.3)
What is a Reserve Branch Bank? How many such 
branches exist, and where are most of them located?
 8. 
(LO 4.3)
How are members of the Board of Governors of the 
Federal Reserve System appointed? To what extent are they subject 
to political pressures?
 9. 
(LO 4.3)
Discuss the structure, functions, and importance of the 
Federal Open Market Committee.
 10. 
(LO 4.3)
Identify the seven individuals who served as chairs of 
the Fed Board of Governors since the early 1950s. Indicate each indi-
vidual’s approximate time and length of service as chair. 
 11. 
(LO 4.4)
Distinguish among the dynamic, defensive, and accom-
modative responsibilities of the Fed.
 12. 
(LO 4.4)
Identify and briefl y describe the three traditional instru-
ments that may be used by the Fed to set monetary policy.
 13.