The following net transaction accounts and cash reserves at the Fed have been documented by a bank for computation of its reserve requirements (in millions) under lagged reserve accounting.
The average vault cash for the computation period has been estimated to be $1 million per day.
a. What level of average daily reserves is required to be held by the bank during the maintenance period, May 11–24?
b. Is the bank in compliance with the requirements?
c. What amount of required reserves can be carried over to the following computation period?
d. If the average cost of funds to the bank is 8 percent per year and deposits at the Fed pay 0.5 percent, what is the effect on the income statement for this bank for this reserve period?