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a bank has $100 million of checkable deposits, $6 million of required reserves, and $2 million of excess reserves. what is the required reserve ratio?'

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A bank has checkable deposits worth $100 million, necessary reserves of $6 million, and excess reserves of $2 million, so the required reserve ratio is 6%.

what is reserve ratio?

  • The reserve ratio is the percentage of reservable liabilities that commercial banks are required to hold in reserve rather than lend out or invest.
  • This standard is established by the nation's central bank, in this case the Federal Reserve in the United States.
  • It is also referred to as the cash reserve ratio.
  • The required reserve ratio can be calculated by simply dividing the amount of money a bank must hold in reserve by the amount of money it has on deposit.

How does it calculate the reserve ratio?

The given data is,

Deposit amount=$100 million

Reserved maintained by bank=$6 million

Excess reserves=$2 million

Reserve ratio =(Reserved maintained by bank÷ Deposits)×100

=(6÷100)×100

Reserve ratio=6%

A bank has checkable deposits worth $100 million, necessary reserves of $6 million, and excess reserves of $2 million, so the required reserve ratio is 6%.

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