Robba Bank has $500 million in deposits,is meeting its usual reserve ratio,and has no excess liquidity.It has $125 million in liquid assets.Robba Bank therefore has a reserve ratio of ________.

Question

Quizplus · Accepted Answer

The reserve ratio is the percentage of deposits that banks are required to hold as reserves. It is calculated by dividing the required reserves by the bank's deposits.

Given that Robba Bank has $500 million in deposits and is meeting its usual reserve ratio, we can calculate the required reserves as follows:

Required reserves = Reserve ratio x Deposits

Since the bank is meeting its usual reserve ratio, we can assume that the reserve ratio is the same as the required reserve ratio set by the central bank.

Assuming that the reserve ratio is r, we can set up the following equation:

r x $500 million = $125 million

Solving for r, we get:

r = $125 million / $500 million = 0.25 = 25%

Therefore, the answer is (C) 25 per cent.

Robba Bank Has $500 Million in Deposits,is Meeting Its Usual