Answered

Consider the information for First National Bank: it has $80 million in checkable deposits, $15 million in deposits with the Federal Reserve, $5 million cash in the bank vault, and $5 million in government bonds. If the reserve ratio is 20%, what are the excess reserves available for the bank to lend

Answer :

Answer:

$64 million

Explanation:

The excess reserves available for the bank to lend if the minimum reserve ratio is 20% is $64 Million.

Answer:

$64million excess reserve.

Explanation:

We are given the following;

Checkable deposits =$80million

Federal reserve deposits= $15million

Bank vault = $5million

Government bond= $5million

To calculate the excess reserve available, we must first calculate the required reserve

Required reserve = $80million+$15million+$5million+$5million×0.2

= $105million × 0.2

=$21million

Excess reserve will now be

= total reserve - required reserve

= $85million - $21milliion

=$64million

We have $64million as the excess reserve available for the bank to lend.

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