Use the following balance sheet for XYZ Bank,which is one of many banks in a banking system.
Table 13.1-XYZ Bank balance sheet
-Refer to Table 13.1.With a required reserve ratio of 15 percent,XYZ Bank would have excess reserves of:
A) $15,000.
B) $20,000.
C) $50,000.
D) $150,000.

Question

Use the following balance sheet for XYZ Bank,which is one of many banks in a banking system.
Table 13.1-XYZ Bank balance sheet 
-Refer to Table 13.1.With a required reserve ratio of 15 percent,XYZ Bank would have excess reserves of:
A) $15,000. 
B) $20,000. 
C) $50,000. 
D) $150,000.

Quizplus · Accepted Answer

Excess reserves are the funds that a bank holds above the required reserve ratio. To calculate the excess reserves, we need to first calculate the required reserves, which is 15% of the bank's deposits. 
Required reserves = 0.15 x $400,000 = $60,000 
Now, we can find the excess reserves by subtracting the required reserves from the bank's total reserves. 
Excess reserves = $80,000 - $60,000 = $20,000 
Therefore, the correct answer is B) $20,000.

Use the Following Balance Sheet for XYZ Bank,which Is One