Use the information below to answer the following questions.
Fact 8.4.2
The Bank of Hobbiton has chosen the following initial balance sheet:

-Refer to Fact 8.4.2.Based on the Bank of Hobbiton's initial balance sheet, what is its desired reserve ratio?
A)10 percent
B)5 percent
C)100 percent
D)20 percent
E)cannot be calculated with the available information

Question

Use the information below to answer the following questions.
Fact 8.4.2
The Bank of Hobbiton has chosen the following initial balance sheet:
 
-Refer to Fact 8.4.2.Based on the Bank of Hobbiton's initial balance sheet, what is its desired reserve ratio?
A)10 percent 
B)5 percent 
C)100 percent 
D)20 percent 
E)cannot be calculated with the available information

Quizplus · Accepted Answer

The desired reserve ratio is the ratio of reserves to deposits. In this case, the bank has $10 million in reserves and $200 million in deposits, so the reserve ratio is 5 percent ($10 million / $200 million = 0.05). Therefore, the correct answer is B.

Use the Information Below to Answer the Following Questions