Response to the following problem:
City Bank has estimated that its average daily demand deposit balance over the recent 14-day computation period was $225 million. The average daily balance with the Fed over the 14-day maintenance period was $10 million, and the average daily balance of vault cash over the two-week computation period was $7 million.
a. Under the rules effective in 2010, what is the amount of average daily reserves required to be held during the reserve maintenance period for these demand deposit balances?
b. What is the average daily balance of reserves held by the bank over the maintenance period? By what amount were the average reserves held higher or lower than the required reserves?
c. If the bank had transferred $35 million of its deposits every Friday over the two-week computation period to one of its off-shore facilities, what would be the revised average daily reserve requirement?