[inquiringmind10]

A bank is short cash reserves in the amount of $225 million a condition expected to last for the next five business days and is weighing (a) securing a loan in the domestic federal funds market, where the interest rate prevailing today is 5.45 percent; (b) issuing 7 day domestic negotiable CDs at a current market rate of 5.50 percent; or (c) tapping its foreign branch offices for 30 day Eurodollars at a market rate of 5.58 percent. The estimated noninterest cost of all of these various funding sources is approximately the same, except that the domestic CDs currently carry an annual FDIC insurance fee of $0.04 per every $100 in deposits received from the public. Which source of funds would you recommend the bank make use of? What factors should the banks funds management division weigh in making this borrowing decision?

Suppose someone wished to maintain $1.00 in pocket money (currency and coin) and $10.00 in liquid savings assets (small CDs, money funds, and savings accounts) for every $1.00 in their checking accounts (transaction deposits). If banks choose their desired reserves to be ten cents for every dollar of transaction deposits, what are the reserve multiplier and the money (M2) multiplier if the Federal Reserve’s reserve requirement ratio is: (a) 8 percent; (b) 10 percent; and (c) 12 percent?

[Fr_Chuck]

I have merged your two posts,

What in heavens name do they have to do with Chase bank and short cash reserves ?

They are obviously home work and not real issues.

We do not do homework

Also if you are going to post questions, give each a new name that deals with your question ( real life questions)