Northern Bank: Balance Sheet Assets Liabilities
Reserves $800 Deposits $10 000
Loans $11 200 Capital $2000
$12 000 $12 000
TABLE 26-6
Refer to Table 26-6.Assume that Northern Bank's target reserve ratio is 10%.What is it's actual reserve ratio?

Question

Quizplus · Accepted Answer

The actual reserve of Northern Bank is $800.
Total deposits of the bank are $10,000.
Therefore, the reserve ratio of the bank is:
($800 / $10,000) x 100 = 8%.

Since the target reserve ratio is 10%, the bank's actual reserve ratio is less than the target by 2%. The closest answer option to this difference is (C) 8.0%.