If a bank has deposits of $100,000, loans of $75,000, cash on hand of $10,000, and $15,000 on deposit at the Federal Reserve, then its reserve ratio is:

Question

Quizplus · Accepted Answer

The reserve ratio is calculated by dividing the bank's reserves (cash on hand + deposits at the Federal Reserve) by its total deposits. Here, reserves are $10,000 + $15,000 = $25,000. Total deposits are $100,000. Thus, the reserve ratio is $25,000 / $100,000 = 0.25 or 25%.

If a Bank Has Deposits of $100,000, Loans of $75,000