Table 14.1
Table $14.1$
EUBANK
$\begin{array}{|l|r|l|r|}
\hline \text { Assets } & & \text { Liabilities and Net Worth } & \
\hline & & & \
\hline \text { Deposits at the Fed } & \$ 40,000 & \text { Checkable Deposits } & \$ 500,000 \
\hline \text { Cash } & \$ 10,000 & \text { Net Worth } & \$ 20,000 \
\hline \text { Loans } & \$ 300,000 & & \
\hline \text { Securities } & \$ 150,000 & & \
\hline \text { Fed Stock } & \$ 20,000 & & \
\hline
\end{array}$
-Refer to Table 14.1 for the balance sheet of Eubank. If Eubank is holding no excess reserves, its required reserve ratio must be _____

Question

Table 14.1
 Table $14.1$
EUBANK
$\begin{array}{|l|r|l|r|}
\hline \text { Assets } & & \text { Liabilities and Net Worth } & \
\hline & & & \
\hline \text { Deposits at the Fed } & \$ 40,000 & \text { Checkable Deposits } & \$ 500,000 \
\hline \text { Cash } & \$ 10,000 & \text { Net Worth } & \$ 20,000 \
\hline \text { Loans } & \$ 300,000 & & \
\hline \text { Securities } & \$ 150,000 & & \
\hline \text { Fed Stock } & \$ 20,000 & & \
\hline
\end{array}$
-Refer to Table 14.1 for the balance sheet of Eubank. If Eubank is holding no excess reserves, its required reserve ratio must be _____

Quizplus · Accepted Answer

In order to determine the required reserve ratio, we need to know the amount of required reserves that Eubank must hold. Required reserves are equal to the required reserve ratio multiplied by checkable deposits. In this case, if Eubank is holding no excess reserves, then its required reserves must be equal to its deposits at the Fed, which are $40,000.

Using the formula for required reserves, we can solve for the required reserve ratio:
Required Reserves = Required Reserve Ratio x Checkable Deposits
$40,000 = Required Reserve Ratio x $500,000
Required Reserve Ratio = 0.08, or 8 percent.

Therefore, the best choice is C) 8 percent.

Table 141 Table 14.114.114.1 EUBANK -Refer to Table 14

Table 141
Table $14.1$ EUBANK -Refer to Table 14