In August 2007, Sun Trust Bank has $83 million in loans and $114 million in M1 deposits. If Sun Trust is holding $4 million in reserves, the bank's reserve ratio is

Question

Quizplus · Accepted Answer

The reserve ratio is the ratio of reserves to M1 deposits. In this case, the reserve ratio is:
($4 million reserve / $114 million in M1 deposits) x 100 = 3.5% reserve ratio. Therefore, the correct choice is (C).

In August 2007, Sun Trust Bank Has $83 Million in Loans