An investor makes a fresh cash deposit of \text{N}500,000 into a commercial bank. The Cent… — JAMB UTME

An investor makes a fresh cash deposit of $\text{N}500,000$ into a commercial bank. The Central Bank enforces a Cash Reserve Ratio (CRR) of $12.5\%$ and a mandatory Liquidity Ratio of $7.5\%$ . Assuming commercial banks hold no excess reserves and the public holds no cash leakages, what is the net total of derivative deposits created by the banking system?

$\text{N}2,000,000$ Cevap
B
$\text{N}2,500,000$
C
$\text{N}3,500,000$
D
$\text{N}100,000$

Cevap

The net total of derivative deposits created by the commercial banking system is

\text{N}2,000,000

Combining the cash reserve ratio (

12.5\%

) and liquidity ratio (

7.5\%

) gives an effective statutory reserve requirement of

20\%

(

0.20

). The credit multiplier is

\frac{1}{0.20} = 5

. Total deposit expansion equals

5 \times \text{N}500,000 = \text{N}2,500,000

. Subtracting the original primary deposit of

\text{N}500,000

yields net derivative credit created of

\text{N}2,000,000

Adım Adım Çözüm

Calculate total legal reserve requirement ratio

Total Reserve Ratio

(r) = \text{CRR} + \text{Liquidity Ratio} = 12.5\% + 7.5\% = 20\% = 0.20

Commercial banks must satisfy both statutory reserve mandates before granting loans.

Calculate total deposit expansion

Total Expansion =

\frac{\text{Initial Deposit}}{r} = \frac{\text{N}500,000}{0.20} = \text{N}2,500,000

Applying the bank credit multiplier formula

\frac{1}{r}

yields maximum gross deposits.

Calculate net derivative deposits created

Derivative Deposits = Total Expansion - Initial Deposit = \text{N}2,500,000 - \text{N}500,000 = \text{N}2,000,000

Derivative deposits consist of newly created credit secondary to the initial primary cash injection.

Anahtar Kavram

Credit Creation and Total Reserve Multipliers

Tahmini Süre:2m 0s

Soru

Cevap

Adım Adım Çözüm

Anahtar Kavram

Sık Yapılan Hatalar

Konular

Bu konudan daha fazla soru