Assume That the Reserve Requirement Is 20 Percent

Assume that the reserve requirement is 20 percent. First National Bank has vault cash and deposits with the Fed of $80 million, loans and securities of $320 million, and demand deposits of $400 million. First National:

A) ​could extend a maximum of $40 million of additional loans.
B) ​could extend a maximum of $20 million of additional loans.
C) ​could extend a maximum of $10 million of additional loans.
D) ​is not in a position to extend additional loans.

Correct Answer:

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