Question

Secondary reserves __________.

a. can be converted into cash with low transaction costs.
b. of none of the above.
c. are not easily converted into cash and are, therefore, of secondary importance to banks
d. count toward meeting required reserves, but only at a rate of $0.50 per dollar of secondary reserves.

Answer 1

The correct option is A,can be converted into cash with low transaction costs.

Step-by-step explanation:

Secondary reserves are the funds invested by bank in short term highly liquid investments,in essence can be converted to cash quickly at very low transaction costs in order to settle unexpected obligations.

Secondary reserves refer to the extra reserves maintained by the banks over and above the minimum regulatory reserve requirement mandated on banks by the Federal Reserve System.The Federal Reserve System as it is popularly known is the central bank in the US.