Question

Suppose that a bank has accepted $20,000 in checking deposits, $40,000 in savings deposits, has $10,000 in cash reserves, and made $50,000 in loans. What is the bank’s reserve ratio?
a) 10%
b) 16.6%
c) 20%
d) 25%

Answer 1

Answer:

16.67%

Explanation:

The computation of the bank reserve ratio is shown below:

= Cash reserves ÷ total deposits × 100

where,

Cash reserve is $10,000

And, the total deposits would be

= Checking deposits + saving deposits

= $20,000 + $40,000

= $60,000

Now put these values to the above formula  

So, the ratio would equal to

= $10,000 ÷ $60,000 × 100

= 16.67%