The required reserve ratio is 0.226 or 22.6%.
Given that a depository institution holds $164 million in required reserves and $9 million in excess reserves and Its remaining assets include $417 million in loans and $137 million in securities.
The following equality always holds.
Total liabilities=Total assets
It is given that the institution's only liabilities are transaction deposits.
This means:
Total transaction deposits=Total assets
Total transaction deposits=Required reserves + Excess reserves + Loans + Securities
Total transaction deposits=$164+$9+$417+$137
Total transaction deposits=$727
Calculate the required reserve ratio as follows:
Required reserve ratio=(Required reserves)/(Total transaction deposits)
Required reserve ratio=($164 million)/($727 million)
Required reserve ratio=0.226 or 22.6%.
Hence, the required reserve ratio when a depository institution holds $164 million in required reserves and $9 million in excess reserves and Its remaining assets include $417 million in loans and $137 million in securities is 0.226 or 22.6%.
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