Banks can lend up to 90% of money on deposit in the bank to other clients.
The other 10% that the bank does not lend is called the "fractional reserve".
Now, by lending this 90% to a client, the money supply may increase based on the procedure below:
First client deposits 100$ in the bank
Bank lends 90$ to second client who deposits these 90$ in another bank
This other bank lends 81$ from the deposited 90$ to a third client who deposits them in a new bank.
The new bank lends 72.9$ out of these 81$ to a fourth clients who deposits them in a different bank......and so the cycle continues increasing the money supply
Answer:
Kindly see Explanation
Explanation:
April 10:
Dr Cash 37,800
Cr Sales 34,500
Cr Sales taxes 3,300
April 15:
Dr Cash 28,080
Cr Sales 26,000
Cr Sales taxes 2,080
Cash = 34500+3300 = 37800
Sales = 28080/1.08 = 26000
Sales tax (28080 - 26000) = 2080
Answer:
a) should install the solar cells
alternative 1, solar cells
initial investment $18,000
annual expenses $2,400 (5 years)
NPV = $27,097.89
AW = (10% x $27,097.89) / [1 - (1 + 10%)⁻⁵] = $7,148.36
alternative 2, power line
initial investment $27,500
annual expenses $1,000 (5 years)
NPV = $31,290.79
AW = (10% x $31,290.79) / [1 - (1 + 10%)⁻⁵] = $8,254.43
b) $23,307.10
Answer:
No, Larry will not accumulate enough money
Explanation:
To determine whether or not Larry will be able to accumulate enough money to buy the boat, we need to work out the future value of he investment
<em>Future value of an investment is the amount an investment will worth at a future date if interest is earned at a specific rate compounded.</em>
<em>So we work out the future value of Larry's investment:</em>
FV = PV × ( (1+r)^n -1)/r
= 4000 × ( (1.1)^5 - 1)/0.1 )
= $ 24,420.40
At the end of the fifth year he would have only accumulated $24,420.40
which is less than the cost of the boat.
No, Larry will not accumulate enough money
