Question

A bank has $10 million in vault cash and $110 million in deposits. If total bank reserves were $15 million with $2 million considered to be excess reserves, what required reserves ratio is implied?

Answer 1

Answer:

Reserve ratio will be equal to 11.81 %

Explanation:

We have given vault cash = $10 million

Total deposit = $110 million

Reserve amount is equal to $15 million

And excess reserve = $2 million

So actual reserve amount = $15 - $2 = $13 million

Reserve ratio is equal to the ratio of reserve amount and deposited amount

So reserve ratio $\frac{13}{110}=0.1181$ = 11.81%

So reserve ratio will be equal to 11.81 %