If a bank has $10 million in total deposits from customers, holds $3 million in reserves,...

If a bank has $10 million in total deposits from customers, holds $3 million in reserves, and has a reserve requirement of 20% imposed by the Fed, which statement is TRUE?

The bank's reserve ratio is 20%, and the bank is fully loaned-up.

The bank's reserve ratio is 30%, and the bank is not fully loaned-up.

The bank's reserve ratio is 20%, and the bank is not fully loaned-up.

The bank's reserve ratio is 30%, and the bank is fully loaned-up.

Solutions

Expert Solution

Answer - Option B.

The reserve ratio is 30 % , and bank is not fully loaned up.

Reserve ratio = 3/10*100

= 30 %

Since there are excess reserves present in bank , the bank is not fully loaned up. Hence Option B will be correct

Rahul Sunny answered 1 year ago

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