Question

Imagine that odyssey national is a brand new bank, and that its required reserve ratio is 10 percent. if it accepts a $1,000 deposit, then its excess reserve balance will be:____.

Answer 1

Imagine that odyssey national is a brand new bank, and that its required reserve ratio is 10 percent. if it accepts a $1,000 deposit, then its excess reserve balance will be $900.

The reserve ratio is the portion of reservable liabilities that commercial banks have to hold onto, rather than lend out or make investments. That is a requirement decided by way of the united states of America's relevant financial institution, which in the u.s.a. is the Federal Reserve.

Allow's expect that bank XYZ has $400 million in deposits. If the Federal Reserve's reserve ratio requirement is 10%, financial institution XYZ should keep at least $40 million in an account at a Federal Reserve bank and might not use that cash for lending or any other cause.

A reserve requirement is an important bank law that sets the minimal quantity that a business financial institution should keep in the liquid property.

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