The average daily net transaction accounts of a local bank during the most recent reserve computation period is $589 million. The amount of average daily reserves at the Fed during the reserve maintenance period is $73.31 million,and the average daily vault cash corresponding to the maintenance period is $8.36 million. What is the average daily reserve balance required to be held by the bank during the maintenance period and is this bank in compliance with reserve requirements?

Question

Quizplus · Accepted Answer

The average daily reserve balance required is calculated by applying the reserve requirement percentage to the average daily net transaction accounts. Assuming a reserve requirement of 10% (as an example, since the exact requirement isn't provided), the required reserve would be 10% of $589 million = $58.9 million. The bank's actual reserve is the sum of its reserves at the Fed and its vault cash, which is $73.31 million + $8.36 million = $81.67 million. Since $81.67 million is greater than the required $58.9 million, the bank is in compliance. However, without the specific percentages and calculations provided in the question, we rely on the choices given. Choice A is the correct answer because it suggests the bank has met its reserve requirements, which aligns with the explanation that the bank's actual reserves exceed the required reserves, even though the specific numbers provided in the choices do not directly match the calculation example given.

The Average Daily Net Transaction Accounts of a Local Bank