assets cash in bank vault $2 million deposits in federal reserve $13 million loa

Question

assets

cash in bank vault $2 million

deposits in federal reserve $13 million

loans $75 million

property $8 million

bonds $2 million

Liabilities

checkable deposit $100 million

Refer to the balance sheet. If the required reserve ratio for ABC Bank is 15%, then the bank is required to maintain minimum reserves of ________ and will have excess reserves of ________:

$100 million; $0 million.

$15 million; $85 million.

$15 million; $2 million.

$15 million; $0 million.

$100 million; $0 million.

$15 million; $85 million.

$15 million; $2 million.

$15 million; $0 million.

Explanation / Answer

Checkable deposits = $100 M

Required reserve ratio = 15%

Required reserves = 15% of $100 M = $15 Million

Excess reserves = Checkable deposits - Required reserves = $100 M - $15 M = $85 M

Therefore, correct option: (b) $15 M, $85 M

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