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First Bank Inc. has estimated that its average daily demand deposits during its recent reserve computation period was $580 million.

a. What is the average daily required reserves to be held by the bank during the maintenance period? Under current regulations, the reserve requirement is 0% for the first $15.2m, 3% between $15.2m - $110.2 million and 10% thereafter.

b. The bank has maintained an average of $5.77m per day as cash in vault and $52.4m per day as reserves at the Fed during the maintenance period. Is the bank in compliance with the requirements for the current period? Explain.

c. How much fed funds should they have purchased or sold during the maintenance period in order to maintain the exact reserve requirements?

Cost Accounting, Accounting

  • Category:- Cost Accounting
  • Reference No.:- M92636045

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