A Bank That Borrows from the Fed at 3 Percent

Multiple Choice

A bank that borrows from the Fed at 3 percent annual interest

A) must hold 3 percent of its total reserves as required reserves
B) must hold 97 percent of its total reserves as required reserves
C) will be able to profit by charging less than 3 percent for its loans
D) hopes to charge more than 3 percent for its loans
E) must give up U.S.government securities to secure the loan