Given the balance sheet below and assuming a required reserve ratio of 20 percent,how much (in dollar terms) is this bank holding in excess reserves?

Question

Given the balance sheet below and assuming a required reserve ratio of 20 percent,how much (in dollar terms)is this bank holding in excess reserves?

Quizplus · Accepted Answer

To calculate excess reserves, we first need to find out the bank's total required reserves. 
Total deposits = $95 million 
Required Reserve Ratio = 20%

Total required reserves = $95 million x 20% = $19 million

Now let's find out the bank's actual reserves:

Total reserves = $30 million (given in the balance sheet)

Excess reserves = Total reserves - Required reserves

Excess reserves = $30 million - $19 million = $11 million

Therefore, the bank is holding $11 million in excess reserves.

The closest option is D, which is $19 million, but that is the amount of required reserves, not excess reserves.

Given the Balance Sheet Below and Assuming a Required Reserve