If a bank has customer deposits of $150 million, $15 million in reserves and the amount of excess reserves equals 0 (zero):

Question

Quizplus · Accepted Answer

To find the required reserve rate, we need to use the formula:

Required Reserve = Required Reserve Rate x Customer Deposits

We know that Customer Deposits = $150 million and Excess Reserves = $0, and we are given that Reserves = $15 million. We can use this information to find the Deposits subject to the reserve requirements:

Reserves + Deposits Subject to Reserve Requirements = Customer Deposits

$15 million + Deposits Subject to Reserve Requirements = $150 million

Deposits Subject to Reserve Requirements = $135 million

Next, we can use the formula above to find the required reserve rate:

Required Reserve Rate = Required Reserve / Deposits Subject to Reserve Requirements

Required Reserve = Reserves = $15 million

Deposits Subject to Reserve Requirements = $135 million

Required Reserve Rate = $15 million / $135 million = 0.1111

Required Reserve rate = 0.1111 or 11.11%

This is equivalent to a required reserve rate of 10%, so the answer is B.

If a Bank Has Customer Deposits of $150 Million, $15