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nordsb [41]
3 years ago
14

The central bank requires Southern to hold 10% of deposits as reserves. Southern Bank's policy prohibits it from holding excess

reserves. If the central bank sells $25 million in bonds to Southern Bank which of the following will result?
A. the money supply in the economy decreases
B. Southern's net worth increases by $25 million
C. decrease in Southern's bond assets by $25 million
D. increase in Southern's loan assets of $25 million
Business
1 answer:
Mama L [17]3 years ago
6 0

The money supply in the economy decreases.

Answer: Option A

<u>Explanation:</u>

The central bank of the country has certain measures which can control the supply of the money in the economy. One of those measures is to buy and sell bonds in the market.

If the central bank sells bonds to the other banks, it will result in the decrease in the supply of the money in the market because the reserves in the bank also reduces. The bank purchases the bonds from the central bank and thus the reserves decrease.

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Answer:

1. If a firm increases its dividend payout rate the: firm will have less cash available for new investment. True

2. Stock price will likely fall by the same percentage. False

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Explanation:

1. If a firm increases its dividend payout rate the: firm will have less cash available for new investment. This assertion is true because the company would be paying out a larger portion of earnings as dividends, hence the balance portion for new investment will be lower as a result.

2. Stock price will likely fall by the same percentage. This assertion is most unlikely because normally, if a particular stock is paying higher dividends investors will have high expectation and be willing to pay a higher price to buy a stock that pays high dividends

3. Retention ratio will rise at the same rate. This conclusion is also incorrect because pay out ratio and retention ratio have an inverse relationship. If more dividend is paid out, then less money is retained.

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3 years ago
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olga55 [171]

Answer:

The correct answer is letter "A": Shareholder's equity is the residual value of a firm.

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Shareholders' equity is a measure of a company's net worth. I can be calculated by subtracting the company's total liabilities from its assets. It is also understood as the <em>funds remaining after all creditors and debts are paid</em> that is why we could say it is the residual value of the firm.

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B. A C Corporation is by definition taxed SEPARATELY from it's owners in the United States of America. Seeing as both Corporations were C Corporations, Jonathan as the owner of both companies need not worry about how he should treat the $100,000 payment as he will not ne taxed on it.

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