Assume the Trusty Bank's balance sheet is as follows:

-Refer to the information above to answer this question.If the bank had $2500 in excess reserves what would be its target reserve ratio?

Question

Assume the Trusty Bank's balance sheet is as follows:
 
-Refer to the information above to answer this question.If the bank had $2500 in excess reserves what would be its target reserve ratio?

Quizplus · Accepted Answer

Excess reserves = actual reserves - required reserves 
$2500 = ($150,000 x target reserve ratio) - ($170,000 x target reserve ratio) 
$2500 = ($150,000 - $170,000) x target reserve ratio 
$2500 = -$20,000 x target reserve ratio 
target reserve ratio = -$2500 / -$20,000 = 0.125 or 12.5%

Assume the Trusty Bank's Balance Sheet Is as Follows