The table below shows the balance sheet of Eubank. If Eubank is holding no excess reserves, its required reserve must be:

Question

Quizplus · Accepted Answer

Required reserve ratio is the proportion of deposits that banks are required to hold as reserves. It is calculated by dividing required reserves by total deposits. The formula for required reserves is: Required Reserves = Required Reserve Ratio x Total Deposits. Given that Eubank has total deposits of $100 million and loans of $80 million, its total reserves would be $20 million. If Eubank is holding no excess reserves, then its required reserves would be $10 million (as total reserves minus excess reserves equals required reserves). Therefore, the required reserve ratio would be 10 percent ($10 million required reserves divided by $100 million total deposits). Hence, the correct answer is C.

The Table Below Shows the Balance Sheet of Eubank