Question

Singular Savings Bank received an initial deposit of $3000. It kept a percentage of this money in reserve based on the reserve rate and loaned out the rest. The amount it loaned out was eventually all deposited back into the bank. If this cycle continued indefinitely and eventually the $3000 turned into $50,000, what was the reserve rate?

Answer 1

basically tweaking the reserve rate until at the 260th iteration the Total Money Deposited approached $50,000. The reserve amount is 6%, so that 94% of the 3,000 is loaned out, which would be 2,820, and then 94% of that is loaned out which is 2,650.80, and so forth. 

Answer 2

Basically tweaking the reserve rate until at the 260th iteration the Total Money Deposited approached $50,000.

The reserve amount is 6% so 94% of the 3,000 is loaned out, which would be 2,820, and then 94% of that is loaned out which is 2,650.80, and so forth.

What is Reserve Ratio?

Reserve Ratio is also known as Cash Reserve Ratio, it is the percentage of deposits that commercial banks are required to keep as cash according to the directions of the central bank.

What is meant by reserve ratio?

The reserve ratio is the portion of reservable liabilities that commercial banks must hold onto, rather than lend out or invest. This is a requirement determined by the country's central bank, which in the United States is the Federal Reserve. It is also known as the cash reserve ratio.

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