Table 9-5
Bolton Bank: Partial Balance Sheet
(All figures in $ million)

-Refer to Table 9-5. The required reserve ratio is 10%. What is the amount of Bolton Bank's excess reserves?
A) $30 million
B) $70 million
C) $100 million
D) zero

Question

Table 9-5
Bolton Bank: Partial Balance Sheet
(All figures in $ million)
 
-Refer to Table 9-5. The required reserve ratio is 10%. What is the amount of Bolton Bank's excess reserves?
A) $30 million 
B) $70 million 
C) $100 million 
D) zero

Quizplus · Accepted Answer

Excess reserves are the amount of reserves held by a bank over and above its required reserves. The required reserve ratio is 10%, which means that Bolton Bank is required to hold $100 million in reserves ($1,000 million x 10%). However, the bank is currently holding $130 million in reserves, which means that it has excess reserves of $30 million ($130 million - $100 million = $30 million). Therefore, the correct answer is B.

Table 9-5 Bolton Bank: Partial Balance Sheet