Table 10-3
The following information pertains to the Bank of Edmonton.

-Refer to the Table 10-3.If the Bank of Edmonton has loaned out all the money it wants,given its deposits,what is its reserve ratio?
A)1 percent
B)5 percent
C)10 percent
D)15 percent

Question

Table 10-3
The following information pertains to the Bank of Edmonton.
 
-Refer to the Table 10-3.If the Bank of Edmonton has loaned out all the money it wants,given its deposits,what is its reserve ratio?
A)1 percent 
B)5 percent 
C)10 percent 
D)15 percent

Quizplus · Accepted Answer

Reserve ratio is the portion of deposits that banks are required to keep on hand as reserves. If the bank has loaned out all the money it wants to, with deposits of $100 million, it has lent out $90 million, retaining $10 million in reserves. Therefore, its reserve ratio is 10 percent ($10 million in reserves ÷ $100 million in deposits = 0.10 or 10%).

Table 10-3 The Following Information Pertains to the Bank of Edmonton