Short problems related to Present value, Interest rate, Deposits, Excess reserves, assets and Liabilities.

1. Illustrate what is the present value of $300 to be paid in two years if the interest rate is 12%?

2. Illustrate what happens to reserves at Third National Bank if one person withdraws $2,000 of cash and another person deposits $750 of cash?

3. When $1 million is deposited at a bank, the required reserve ratio is 20 percent, and the bank chooses not to hold any excess reserves but makes loans instead, then, in the bank's final balance sheet,

a) The assets at the bank increase by $800,000.

b) Reserves increase by $160,000.

c) The liabilities of the bank increase by $1,000,000.

d) The liabilities of the bank increase by $800,000.