Question

first national bank has $101 million in checkable deposits, $25 million in deposits with the federal reserve, $14 million cash in the bank vault, and $11 million in government bonds. if the minimum reserve ratio is 9%, how much in millions of dollars is the bank required to keep in reserves? if the answer is $100 million, then use 100 for your response

Answer 1

The minimum amount that national bank must keep in reserves is $10.35, considering the reserve ratio.

Calculation:

Check deposit = $101 million

Cash = $14 million

Total = $115 million

minimum reserve ratio = 9%

Amount that national bank is required to keep in reserves is 9%*115 = $10.35 million

The amount of reservable assets that corporate banks must keep onto instead of lending out and instead invest is known as the reserve ratio. The central bank of the nation, in this case the Federal Reserve in the U. S., sets this criterion. It is often referred to as the ratio of excess cash.

The reserve ratio, which is frequently used interchangeably with the reserve ratio, describes the minimum amount of assets that an institution must maintain. Regulation D of the Federal Reserve Board's lays out the reserve ratio. Including all deposit accounts with financial transactions, Regulation D imposed a set of standard reserve requirements. It also mandates that banks submit regular reports to the Reserve Bank.

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