A bank has $50,000 in deposits from its checking account customers and loans of $49,000. Of the $49,000 loaned out, $43,000 remains in the checking accounts of the loan recipients. The bank has $50,000 cash on hand, and the reserve requirement is 25%. The reserve ratio for this bank is _____, and it _____ meeting its reserve requirement.
A) 0.002%; is not
B) 20%; is
C) 53.76%; is
D) 186%; is not

Question

Quizplus · Accepted Answer

The reserve ratio is calculated by dividing the bank's actual reserves by its total deposits. Here, the bank has $50,000 cash on hand as reserves and $50,000 in deposits, so the reserve ratio is 100% ($50,000 / $50,000). Since the reserve requirement is 25%, the bank is exceeding its reserve requirement, not just meeting it. However, the correct calculation and interpretation were not provided in the options, indicating a misunderstanding in the question's setup or in the interpretation of the provided options. The closest correct interpretation based on the given options would be that the bank is indeed meeting its reserve requirement, but the specific percentages provided in the options do not accurately reflect the calculated reserve ratio.

A Bank Has $50,000 in Deposits from Its Checking Account