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Chapter 11 Managing Liquidity 447 Activity Calculation of Required Reserves. At the close of business on Wednesday, Gene Wand- ling was reviewing whether Hawkeye National Bank was successful in meeting its legal reserve requirements at the Federal Reserve. The bank had just completed the two-week reserve maintenance period, during which it held a daily average of $238 million in reserve deposits with the Federal Reserve. The bank had a daily average reserve deficiency the previous maintenance period of $3.75 million, which was within the allowable limit. Hawkeye National Bank's daily average net transactions accounts for the base computa- tion period along with balances for selected assets are listed below. Daily Average (Millions of Dollars) $3,257 Net transactions accounts Demand deposits due from U.S. depository institutions 366 Cash items in process of collection Hawkeye National Bank could use daily average vault cash holdings of $19.3 million to offiset its reserve requirement. Using the reserve percentages from Exhibit 11.3, calculate the bank's daily average required reserve holdings during the maintenance period. Did Hawkeye meet its reserve target? If the bank had carried forward a daily reserve surplus of $2.1 million instead of a deficiency, would it have met its target? What are the costs to a bank if its reserves fall outside the target range? References Allen, Linda, Stavros Peristiani, and Anthony Saunders, "Bank Size, Collateral, and Net Rehavior in the Federal Funds Market: Empirical Evidence" The lournal of

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