Question

The Megabux National Bank currently has deposits of $200 million. If the Fed establishes a reserve requirement of 12 percent, Megabux National must hold reserves of _______ against its deposits.A. $12 million B. $24 million C. $176 million D. $200 million

Answer 1

Answer:

Option (B) is correct.

Explanation:

Given that,

Megabux National Bank currently has deposits = $200 million

Fed establishes a reserve requirement = 12 percent

Therefore,

Reserves must be hold by the Megabux national bank against its deposits:

= Amount of Deposits × Required reserve ratio

= $200 million × 12 percent

= $200 million × 0.12

= $24 million