Assume a bank currently holds $75 million in demand deposits,$10 million in vault cash and $25 million deposited at the Federal Reserve.If the required reserve ratio is 15 percent,how much must the bank hold in required reserves?

Question

Assume a bank currently holds $75 million in demand deposits,$10 million in vault cash and $25 million deposited at the Federal Reserve.If the required reserve ratio is 15 percent,how much must the bank hold in required reserves?

Quizplus · Accepted Answer

Required reserves = (Demand deposits × required reserve ratio) + (Vault cash + deposited at the Federal Reserve)
= (75 million × 0.15) + (10 million + 25 million)
= 11.25 million + 35 million
= $46.25 million
Therefore, the bank must hold $11.25 million in required reserves.

Assume a Bank Currently Holds $75 Million in Demand Deposits,$10