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Marina CMI [18]
4 years ago
9

The intracoastal bank has $5 million in deposits and $500,000 in reserves. if the required reserve ratio is 5%, excess reserves

are equal to
Business
1 answer:
gtnhenbr [62]4 years ago
6 0
We write down the equation that would allow us to solve for the required reserves.
      required reserve = (deposit)(required reserve ratio)

From the items above, we are given that,
     deposit = $5 million
    required reserve ratio = 5% = 0.05

Substituting,
     required reserve = (0.05)($5 million)
     required reserve = $250,000

The total amount that the bank for the reserves is $5.5 million.
The excess reserve is equal to,
              excess reserve = ($5.5 M) - ($250,000)
             excess reserve = $5.25 M

<em>ANSWER: $5.25M</em>
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