A bank borrows $100,000 from the Fed, leaving a $100,000 Treasury bond on deposit with the...

A bank borrows $100,000 from the Fed, leaving a $100,000 Treasury bond on deposit with the Fed to serve as collateral for the loan. The discount rate that applies to the loan is 4 percent and the Fed is currently mandating a reserve ratio of 10 percent. How much of the $100,000 borrowed by the bank must it keep as required reserves

Expert Solution

A bank borrows $\$ 100,000$ from the Federal Reserve. No required reserve need to keep from the borrowed amount. Hence the bank keeps as required reserve from $\$ 100,000$ is zero.

Rahul Sunny answered 2 years ago

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