Third Bank has reserves of $12.3 million and transaction accounts of $115 million.If required reserves are 10 percent of transactions accounts, Third Bank has excess reserves of
A)−$0.8 million.
B)$0.
C)$0.8 million
D)$0.08 million

Question

Quizplus · Accepted Answer

To find excess reserves, we need to first calculate the required reserves. Given that required reserves are 10% of transaction accounts, we have:

Required Reserves = 10% of $115 million 
= 0.10 x $115 million 
= $11.5 million

Now, we can find excess reserves by subtracting required reserves from actual reserves:

Excess Reserves = Reserves - Required Reserves 
= $12.3 million - $11.5 million 
= $0.8 million

Therefore, the answer is C) $0.8 million, as Third Bank has excess reserves of $0.8 million.

Third Bank Has Reserves of $12