Question

if the reserve rate is 4% and a bank receives a deposit of 12,000, how much of the 12,000 is the bank free to loan out

Answer 1

So the reserve rate is 4% or 0.04

1.00 - 0.04 = 0.96

12,000 x 0.96 = 11,520

The bank is free to loan out $11,520

Answer 2

As given,

The reserve rate of the bank is 4% which means the bank will loan out 96% freely.

The bank receives a deposit amount of = $12000

So, we will find 96% of this amount, that will be free to loan. so 96% of 12000 is =

`(96)/(100)*12000`

= 11520

Hence, the bank is free to loan out $11,520.