$$\begin{array} { | l | c | }
\hline { \text { Type of Deposit } } & \text { Reserve Requirement } \
\hline \text { Checkable Deposits } & \
\hline \$ 7.8 \text { - 48.3 Million } & 3 \% \
\hline \text { Over \$48.3 Million } & 10 \
\hline \text { Noncheckable personal savings and time deposits } & 0 \
\hline
\end{array}$$ Refer to the accompanying table. If a bank has $60 million in savings deposits and $40 million in checkable deposits, then its required reserves are
A) $30 million.
B) $3 million.
C) $1.8 million.
D) $1.2 million.

Question

$$\begin{array} { | l | c | } 
\hline { \text { Type of Deposit } } & \text { Reserve Requirement } \
\hline \text { Checkable Deposits } & \
\hline \$ 7.8 \text { - 48.3 Million } & 3 \% \
\hline \text { Over \$48.3 Million } & 10 \
\hline \text { Noncheckable personal savings and time deposits } & 0 \
\hline
\end{array}$$ Refer to the accompanying table. If a bank has $60 million in savings deposits and $40 million in checkable deposits, then its required reserves are
A) $30 million.
B) $3 million.
C) $1.8 million.
D) $1.2 million.

Quizplus · Accepted Answer

The required reserves for the $40 million in checkable deposits are calculated as follows: The first $7.8 million to $48.3 million is subject to a 3% reserve requirement, which applies to $32.5 million ($40 million - $7.8 million). Therefore, the required reserves are $0.975 million (3% of $32.5 million). Since savings deposits have a 0% reserve requirement, they do not contribute to the required reserves. Thus, the total required reserves are $0.975 million, which is closest to option D, $1.2 million, acknowledging a potential discrepancy in the calculation or interpretation of the provided options.

Refer to the Accompanying Table