Question

Exhibit 12-1 Balance Sheet BANK ABC ($ millions) Assets Liabilities Required Reserves $20 Checkable Deposits $ 100 Excess Reserves 0 Nontransaction Deps 50 Loans 100 Borrowings 5 Securities 40 Bank Capital (A) ​ ​ Refer to Exhibit 12-1. The required reserve ratio is a. 0.30. b. 0.10. c. 0.15. d. 0.25. e. 0.20.

Answer 1

Answer: e. 0.20

Explanation:

The Reserve Requirement is a reserve that the central bank of a country requires that Banks hold in case people started making sudden withdrawals. This way the bank is not in danger of being unable to meet those demands.

The Reserve Requirement is a ratio to the Deposits in the bank by the public.

From the above, the deposits to the bank total $100 million.

The Required Reserves totals $20 million.

This means that the Required Reserves are,

= 20 million / 100 million

= 0.20