Question

If a bank has total deposits of $7,200 and reserves of $1,600: instructions: round to the nearest whole number. (a) what is its current reserve ratio? 5 incorrect % (b) how large is its loan portfolio (outstanding loans)? 88 incorrect %

Answer 1

a.) The current reserve ratio is given by the fraction of the bank's total deposits held in reserves.
Given that the bank's total deposits is $7,200 and the reserves is $1,600, the current reserve ratio is given by:

$\frac{1,600}{7,200} \times100\%=22\%.$


b.) The loan portfolio is given by (total deposit - reserves) / total deposits

Thus, the loan portfolio of the given bank is given by:

$\frac{7,200-1,600}{7,200} \times100\%= \frac{5,600}{7,200} \times100\% \\ \\ =78\%$